November 15, 2019

Budget and Farm Bill; Ag Economy; Trade; and MF Global

Budget and Farm Bill Developments

Rosalind S. Helderman reported in Saturday’s Washington Post that, “Senate leaders reached an agreement Friday to extend the payroll tax cut for two months, averting a New Year’s tax increase for millions of workers. The agreement also will require the administration to decide quickly whether to allow construction of a controversial transcontinental oil pipeline.”

The Post article noted that, “White House communications director Dan Pfeiffer called the deal a ‘significant victory,’ extending a tax cut that many analysts say will help the economy.”

Saturday’s article explained that, “The Senate will vote on the deal Saturday, and the House will take it up next week. The inclusion of the controversial pipeline was intended to satisfy House Republicans who had been objecting to a short-term tax fix. [Senate Minority Leader Mitch McConnell (R-Ky.)] said he was optimistic the deal would find favor with the House.”

Ms. Helderman also noted that, “Senators had spent the day discussing a broader deal that would last 11 months, through November’s election. But they were unable to get past a stumbling block: cuts that would make the roughly $190 billion package deficit-neutral.

“Democratic and Republican aides said that the two sides agreed to about $120 billion in cuts to spending programs.

“But that left a gap of $50 billion to $70 billion, aides said.”

The Post article added that, “Meanwhile, the House approved a massive spending measure Friday that would stave off the threat of a government shutdown through September. The Senate prepared to sign off on the measure as early as Saturday.”

Naftali Bendavid and Janet Hook reported in Saturday’s Wall Street Journal that, “The House’s approval of a $1 trillion spending bill averted a government shutdown that otherwise would have begun Friday at midnight. The Senate is expected to pass the bill Saturday, keeping the government funded through Sept. 30, the end of the fiscal year.

“But a presumptive deal on a year-end package to extend the payroll tax cut and unemployment benefits was more complex, and the two sides agreed to prolong it for just two months rather than a year because they couldn’t agree on how to pay for it. Lawmakers on Capitol Hill are increasingly battle-weary after a year of brinkmanship and are ready to go home for the holidays.”

The Journal writers pointed out that, “The overall package is expected to cost $30 billion to $40 billion. A year-long package would have cost about $190 billion, and the talks ultimately broke down over the perennially tough issue of how to pay for it. Republicans said Democrats wanted to raise taxes, and Democrats said Republicans wanted to cut Medicare benefits.

Lawmakers in the end agreed only on one funding mechanism—an increase in the fees that Fannie Mae and Freddie Mac charge lenders.”

Meredith Shiner reported on Saturday at Roll Call Online that, “Democratic aides familiar with the negotiations between Reid and McConnell said Friday evening that the one-year plan would have been offset with a handful of measures, including $120 billion in mandatory cuts identified by the Joint Committee on Deficit Reduction and a variety of new revenues, including $3 billion from killing a corporate jet tax break and reforms to the tax code for Americans who file as S corporations.

“McConnell on Friday dismissed the pay-fors proposed by Democrats for the larger bill as ‘not credible.’ Republicans wanted to include cuts to Medicare benefits as part of the offsets.”

Nonetheless, Alexander Bolton reported on Saturday at The Hill Online that, “President Obama on Saturday applauded a Senate deal to extend the payroll tax holiday for two months but said Congress should do more to avert higher taxes on middle-class families.”

Also on Saturday, David Rogers reported at Politico that, “Filling in the blank spaces from the August debt accords, Congress approved a far-reaching $1 trillion-plus budget bill Saturday morning that sets a new template for government spending through the 2012 elections — and very well beyond.

Final passage came on a 67-32 Senate roll call which followed on a strong 296-121 bipartisan vote in the House Friday afternoon.”

Mr. Rogers added that, “Indeed, after the burst of bold spending at the beginning of his first year, [President] Obama will now be leading a government that is very much retrenching. In a matter of months the president will submit his new budget plan for 2013. But the August accords allow him only a minimal increase in appropriations and the bill now defines the new reality facing the president — a plateau stretching into the future with annual growth pegged below the rate of inflation.”

And, Jennifer Steinhauer and Robert Pear noted in Saturday’s New York Times that, “The [omnibus spending] bill would require federal agencies to conduct a cost-benefit analysis of proposed federal guidelines for the marketing of food to children.

Margo G. Wootan, director of nutrition policy at the Center for Science in the Public Interest, a research and advocacy group, said, ‘This will not kill, but will delay, the guidelines, which are awaiting final approval at the White House.’”

However, on Sunday, Major Garrett and Katy O’Donnell reported at National Journal Online that, “The Senate’s two-month payroll tax extension is dead on arrival in the House. House Speaker John Boehner, R-Ohio, made that perfectly clear Sunday morning as he said that Congress will have to negotiate a deal closer to the House-passed one-year extension before members leave for the holidays.

“‘Well, it’s pretty clear that I and our members oppose the Senate bill – it’s only for two months,” Boehner said on NBC’s Meet the Press. ‘If you talk to employers, they talk about the uncertainty. How can you do tax policy for two months?’”  (Note: related audio from yesterday’s Meet the Press program is available here (MP3- 3:12)).

Following this development, Russell Berman reported yesterday at The Hill Online that, “House Democrats assailed House Republican opposition to the Senate-passed payroll tax compromise, accusing Speaker John Boehner (R-Ohio) of ‘kow-towing’ to the Tea Party and risking a tax increase for American families.”

In addition, Alexander Bolton reported yesterday at The Hill Online that, “Senate Republican Leader Mitch McConnell (Ky.) on Sunday backed up the House GOP’s demand that the Senate renegotiate a deal to extend the payroll tax holiday.”

The article added that, “A spokesman for Senate Majority Leader Harry Reid (D-Nev.) said earlier in the day that the Senate would not return to Washington next week if the House kills the Senate-passed payroll tax deal.”

Mr. Bolton also pointed out that, “Dan Pfeiffer, the White House communications director, said House Republicans would be responsible for increasing taxes on 160 million people if they blocked the Senate legislation.”

Today, Felicia Sonmez reported in The Washington Post that, “The way forward remains unclear.

“When the House convenes Monday night [votes expected after 6:30 pm ET], it will hold an up-or-down vote on the Senate-passed plan, which Republicans expect will fall short of passage. The chamber may then move to amend the Senate-passed bill or to approve a motion for both chambers to iron out the impasse through a conference committee. Boehner made the case in his ‘Meet the Press’ appearance for a conference committee, saying that was the approach used by lawmakers to reach an agreement on a nearly $1 trillion government funding bill that passed both chambers last week.”

Beyond the uncertainty of these budget developments, William Pack reported late last week at the San Antonio Express-News Online that, “No longer on a fast track to development as part of Congress’ failed deficit reduction foray, the 2012 farm bill now will move forward at a normal pace — but don’t expect the process to be easy.

More than $10 billion of spending cuts already are planned for agricultural programs in 2013 as part of the automatic controls triggered by Congress’ inaction on deficit reduction. That could compound the impact of spending reductions in the farm bill, which proponents hope to complete next year.

“In addition, strong crop prices and deficit hawks are making it harder for farmers to defend the assistance they receive in the farm bill, and farm groups themselves are divided over what should be in the plan. With an election year looming, a vote on the farm bill could be delayed until 2013.”

In other news, Teresa Watanabe reported on Saturday at the Los Angeles Times Online that, “For many students, L.A. Unified’s trailblazing introduction of healthful school lunches has been a flop. Earlier this year, the district got rid of chocolate and strawberry milk, chicken nuggets, corn dogs, nachos and other food high in fat, sugar and sodium. Instead, district chefs concocted such healthful alternatives as vegetarian curries and tamales, quinoa salads and pad Thai noodles.

“There’s just one problem: Many of the meals are being rejected en masse. Participation in the school lunch program has dropped by thousands of students. Principals report massive waste, with unopened milk cartons and uneaten entrees being thrown away. Students are ditching lunch, and some say they’re suffering from headaches, stomach pains and even anemia. At many campuses, an underground market for chips, candy, fast-food burgers and other taboo fare is thriving.”

And, Elise Young reported in yesterday’s Washington Post that, “New Jersey’s Hunterdon County, the hilly region of horse farms and weekend retreats where last year’s median household income was almost $100,000, is a surprising new face of federal food aid.

“Hunterdon, whose 2010 median household income of $97,874 was the highest in New Jersey and fourth-highest in the country, saw food-stamp usage surge 513 percent between 2007 and 2010.”


Agricultural Economy

The AP reported last week that, “The worst drought in Texas’ history has led to the largest-ever one-year decline in the leading cattle-state’s cow herd, raising the likelihood of increased beef prices as the number of animals decline and demand remains strong.

Since Jan. 1, the number of cows in Texas has dropped by about 600,000, a 12 percent decline from the roughly 5 million cows the state had at the beginning of the year, said David Anderson, who monitors beef markets for the Texas AgriLife Extension Service.”

Despite this reduction in the existing herd, with respect to the current calf population, the USDA’s National Agricultural Statistics Service indicated on Friday that, “Cattle and calves on feed for slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 12.1 million head on December 1, 2011. The inventory was 4 percent above December 1, 2010. This is the second highest December 1 inventory since the series began in 1996.”



The AP reported last week that, “After nearly two decades of trying, Russia gained approval Friday to join the World Trade Organization, a move likely to boost its economy and that of its biggest trading partner, the European Union, at a time of global financial turmoil.”

Charles Clover reported on Friday at The Financial Times Online that, “Policymakers on Friday hailed Russia’s formal accession to the World Trade Organisation , saying it will benefit European countries and make Russia a more competitive economy.”

Also, Bloomberg writer Jennifer M. Freedman reported on Saturday that, “The World Trade Organization wrapped up its ministerial meeting without deciding how to revive global commerce talks, focusing instead on welcoming Russia to the fold and securing a government-procurement accord.

“Efforts to reach an agreement during the Doha Round of trade talks have been blocked for years as the countries fail to make concessions on lowering agriculture subsidies and industrial tariffs. Ministers including U.S. Trade Representative Ron Kirk have said the round needs a new approach after a decade of unsuccessful attempts to bridge gaps among 153 nations.”

Meanwhile, Keith B. Richburg reported in yesterday’s Washington Post on a trade issue between the U.S. and China regarding chicken feet.  In part, the article indicated that: “China began imposing stiff duties — including a tax of more than 100 percent — on those American chicken parts. The move was in response to a request by Chinese chicken farmers and processors, who claimed the U.S. government was unfairly subsidizing the American poultry industry through low feed prices and then selling the ‘chicken paws,’ as they’re known in industry parlance, into China at below-market cost.

“The Chinese move raised an interesting legal question: How can the United States be dumping an item at below cost in China when that item is considered virtually worthless at home? ‘It’s taken what used to be a part of the bird that had to be disposed of in the United States and turned it into a revenue stream,’ said Scott Sindelar, the Agriculture Department’s attaché at the U.S. Embassy in Beijing.

“On Dec. 8, the Obama administration’s trade representative asked the World Trade Organization to resolve the issue. In a statement, U.S. Trade Representative Ron Kirk said, ‘We are serious about holding China accountable to its WTO commitments and ensuring that there is a level playing field for American businesses — including our farmers.’”


MF Global

Bloomberg writers Matthew Leising and Silla Brush reported on Friday that, “MF Global Holdings Ltd. used about $700 million of customer funds to ‘meet liquidity issues’ in the days prior to its bankruptcy, according to CME Group Inc. (CME), which had auditing authority over the failed futures broker.

“CME Group detailed its dealings with MF Global in documents released yesterday by the oversight panel of the House Financial Services Committee. Christine Serwinski, chief financial officer for North America at MF Global, and Edith O’Brien, a treasurer, told Mike Procajlo, an exchange auditor, at around 1 a.m. on Oct. 31 in Serwinski’s Chicago office that the customer money was transferred on Oct. 27 and Oct. 28 and possibly Oct. 26, according to a CME Group timeline.”

Jacob Bunge reported in Saturday’s Wall Street Journal that, “The top Democrat on the House Financial Services Committee said that CME Group Inc., the biggest U.S. futures exchange, should no longer be responsible for supervising its own customers in order to eliminate any potential conflicts of interest.

“Spinning off CME’s regulatory functions into a separate entity would help restore investors’ lost confidence in domestic futures markets, Rep. Barney Frank (D., Mass.) said in an interview Thursday.

“‘I have no doubt about the CME’s integrity, but nobody should be in the position of having a dual role,’ Rep. Frank said. ‘We should make sure [a conflict of interest] doesn’t arise, that the temptation isn’t there, that people are not unconsciously influenced.’”

And, Jim Spencer reported on Saturday at the Minneapolis Star Tribune Online that, “The cost of the scandal at MF Global is becoming clearer to farmers and grain elevator operators across the Midwest, and it could be huge.

“A court-appointed trustee testified last week that he has found enough money within the company to pay back roughly 72 percent of missing funds over the next several weeks and may find another 3 cents on the dollar. But trustee James Giddens said generating enough cash to fully cover the entire $1.2 billion taken from customer accounts will be a challenge.

“If that turns out to be accurate, agricultural interests in Minnesota and other states whose commodity trades involved MF Global could be out hundreds of millions of dollars. ‘It’s like putting money in the bank, and someone stole it,’ said Bob Zelenka, executive director of the Minnesota Grain and Feed Association (MGFA).”

Keith Good

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