The Week Ahead: Jan. 6-12, 2014

January 6, 2014 12:19 AM

via a special arrangement with Informa Economics, Inc.

Congress returns with key issues on agenda: FY 2014 spending, jobless benefits, farm bill, WRDA, Yellen nomination

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

As lawmakers return to Washington (Senate on Monday and House on Tuesday), lingering 2013 issues are at the top of the early 2014 agenda, including the need for a Fiscal Year 2014 omnibus spending package, completed conference reports on the new farm bill and Water Resources Development Act (WRDA), a coming vote later on increasing the debt limit, a likely delayed focus on tax extenders (including biodiesel), and an election-tinged debate this week on extending expired jobless benefits.

January will be a short legislative month in the House, as Republicans take a recess the week of Jan. 20 and hold their annual issues conference the latter part of the week of Jan. 27 at a resort in Cambridge, Maryland, where they will discuss an agenda for the remainder of the 2014 election year.

House Majority Leader Eric Cantor (R-Va.) recently told colleagues in a memorandum that one of the first items brought to the floor will be legislation to address security concerns on the federal insurance exchange website. He said Republicans will advance bills demanding greater transparency concerning enrollment data.

The Senate plans to vote today (Monday) on President Barack Obama's nomination of Janet Yellen, vice chairman of the Federal Reserve's Board of Governors, to be the first female chairman of the Federal Reserve System.

The House will consider several measures under suspension of the rules, including a bill (HR 724) regarding the certification of light-duty trucks under the Clean Air Act. The leadership also will bring up a bill (HR 2279) which would amend laws relating to the Environmental Protection Agency's oversight of hazardous substances and increase the role of states in superfund cleanups. The bill combines the Reducing Excessive Deadline Obligations Act (HR 2279), the Federal and State Partnership for Environmental Protection Act (HR 2226) and the Federal Facility Accountability Act of 2013 (HR 2318).

Democrats will seek to enact a three-month extension of unemployment benefits, which expired Dec. 28; Senate Democrats set up a test vote on a bill (S 1845) on Jan. 6. Senate Majority Leader Harry Reid (D-Nevada) said that measure is part of the Democrats' plan to focus on workers' issues in the new session. The bill has bipartisan support in the Senate, where it is cosponsored by Sens. Jack Reed, a Rhode Island Democrat, and Dean Heller, a Nevada Republican. The White House has signaled its support. Reid and other Democrats say they remain optimistic that they can garner five GOP senators to back the three-month extension. "It would seem to me that five Republicans in the Senate should agree with Republicans around the country," Reid said on CBS’s Face the Nation.

Some Republican lawmakers appear open to extending the benefits, as long as Democrats agree to cut other spending or regulations on business. "I’m not opposed to unemployment insurance; I am opposed to having it without paying for it," Republican Sen. Rand Paul of Kentucky said Sunday on the ABC program This Week. He added: "I do think, though, that the longer you have it, that it does provide some disincentive to work."

If any budget offsets are insisted for extending unemployment aid, projected farm bill savings could be used to garner additional House votes for the benefits extension. However, most Democrats argue renewing the benefits constitutes an emergency and balk at the idea of an offset. The Senate bill does not include any offsets. The Reed-Heller bill, which extends benefits through March 31, has a $6.5 billion price tag. Nearly five million long-term unemployed people will lose benefits over the course of the year unless Congress revives the program, said Gene Sperling, director of the White House’s National Economic Council. Sperling said that the government could consider dropping the financial crisis program when the unemployment rate approached 6 percent, a full percentage point lower than it is today.

Democrats also want the Senate to consider a bill (S 1737) early to increase the minimum wage gradually from $7.25 to $10.10, and eventually index it to inflation. The bill faces some Republican opposition and along with extending unemployment benefits, is seen as a "wedge issue" ahead of 2014 elections. For example, Democrats said they will target GOP senators whose states have high unemployment rates – with Reed singling out Arizona, Georgia and Tennessee, all states that have two Republican senators. As for the minimum wage, the current federal minimum is $7.25 per hour, and 21 states have set a higher minimum wage.

A massive omnibus spending bill will likely not be detailed until closer to when Congress will actually vote on the measure – largely due to concerns about decisions agreed to over the long holiday break by key appropriations principals and staff. The current stopgap continuing resolution (CR) for FY 2014 expires Jan. 15. The massive omnibus spending package directing how $1.012 trillion in discretionary funds will be spent will be brought to the floor in each chamber soon after it is finalized, of which $491.8 billion is designated for non-defense spending and $520.5 for defense, which includes not just the Pentagon but nuclear weapons programs overseen by the Energy Department. The House is expected to take up the measure by Jan. 10 and in the Senate by Jan. 13. The funding level reflects the budget agreement approved in December. Sticking points include disagreements over funding levels for the Interior, Financial Services, Labor, and Health and Human Services departments in particular. But even discussions about the top-line numbers for each of the 12 Appropriations subcommittees are ongoing. Committee leaders are expected to handle the remaining disagreements themselves in order to get a bill to the floor of each chamber. Bottom line: the FY 2014 omnibus spending package will be approved, with sources signaling many major policy arguments will be bumped to FY 2015 appropriations.

A Feb. 7 deadline to either extend a current suspension of the debt limit or raise the limit in order to preserve the Treasury Department's borrowing authority is expected to test this session's congressional tone. Republicans have said that they may use the debt limit debate to leverage items they want, including possible revisions to the Affordable Care Act. Those lawmakers also said they will continue to look for opportunities this year to attack the health-care law. The Congressional Budget Office (CBO) said that if the current suspension of the debt ceiling isn't extended or if Congress does not agree to a higher debt limit before Feb. 8, the Treasury will have no room to borrow under regular procedures and will have to begin employing its extraordinary measures for a limited time. CBO projects that those measures will probably be exhausted in March but that the date might shift — depending on the timing and magnitude of tax refunds and receipts this spring.

Likely votes this month will take place on two eventual conference reports covering a new farm bill (HR 2642) and a reauthorization of the Water Resources Development Act (HR 3080). While House and Senate conferees named on both bills could not complete them before adjournment, lawmakers now are expressing optimism that the measures will be finished in the coming weeks. Some Democrats like Rep. Chris VanHollen (D-Md.) have stated they want to hold the farm bill as leverage over an extension of jobless benefits. Sources signal final legislative language could be released next Monday, Jan. 12, and that a meeting of the full farm bill conference could take place late this week, perhaps on Thursday.

The shortened January congressional schedule means a likely effort to get a new farm bill completed by the time of the GOP break – and likely ahead of an early February budget baseline update from the Congressional Budget Office (CBO), which could show lower commodity prices and higher farm program costs than the current baseline being used to score a new farm bill – for example, a new CBO baseline will likely include higher ACRE program outlays, notably for corn. Any higher ACRE payout projections would mean a higher baseline, so that could offset costs of a new bill attributable to lower prices. Last year's CBO's initial baseline was released Feb. 5. One veteran congressional observer notes that CBO can overstate costs, too. For example, by looking back at the 2002 Farm Bill projections, that bill got charged over $70 billion in new costs but in the end little of that was ever spent as loan rates and target prices went dormant over the course of the 2002 and 2008 bills. All that was spent was primarily direct payments that were already in the baseline from the 1996 bill. As for food stamps, others note that CBO analysts could not have anticipated in past farm bills the passage of a stimulus bill that would add billions in food stamp costs and food stamp eligibility. Others say it is more accurate and fair to say CBO underestimates on some things and at some times, but on some programs and at some times it overstates. And CBO cannot take into account intervening legislation.

Longer term, lawmakers will at least debate and perhaps push for a package of tax extenders, including the lapsed biodiesel tax incentive, but some sources say that could be punted until a post-election lame duck session of Congress. Another focus ahead is Section 179 of the tax code (equipment depreciation), where it has reverted back to $25,000. Some sources say action on tax extenders will not occur until tax reform is pronounced "dead" for the year.

Debate on patent legislation will also be a topic for Congress ahead. The House overwhelmingly approved a bill (HR 3309) last year designed to rein in the growing problem of frivolous patent litigation.The Senate Judiciary Committee will likely mark up a patent bill in February or March to address the problem. Committee Chairman Patrick Leahy (D-Vt.) and other lawmakers have offered competing proposals.

The outlook is murky regarding an overhaul of the US tax code this year, with veteran sources believing this will not be completed this year. Both House Ways and Means Committee Chairman Dave Camp (R-Mich.) and Senate Finance Committee Chairman Max Baucus (D-Mont.) have expressed interest in simplifying the tax code by decreasing the plethora of tax breaks but so far have reported little movement. Of note, Cantor's memo made no mention of tax reform. Also, Sen. Baucus' eventual leaving the Senate to be Ambassador to China lowers the odds of tax reform this year. Importantly, tax reform needs presidential leadership, as occurred in similar debates in 1963/64 and 1986.

Regarding immigration reform, the House will likely pass some bills but not comprehensive package like the Senate did in 2013. Congressional sources say the House will move individual immigration reform bills, but the House will not conference with the Senate on a comprehensive bill, pointing out that the problems seen in the massive Affordable Care Act only adds to the House GOP argument to handle immigration reform in piecemeal fashion. in December, House Speaker John Boehner (R-Ohio) hired Becky Tallent, former chief of staff for Sen. John McCain (R-Ariz.) – both have been vocal supporters of the Senate bill. However, Sen. Majority Whip Dick Durbin (D-Ill.) is skeptical that the House can finish a bill before August, which would signal almost certain death for chances of passage before November.

On foreign policy, Cantor said he hoped the House would weigh in on negotiations over Iran's nuclear program after approving sanctions in 2013. Senate Majority Leader Harry Reid still has not publicly signaled his intentions on a floor vote on the legislation (S 1881) sponsored by Foreign Relations Chairman Robert Menendez (D-N.J.) and Mark Kirk (R-Ill.). Reid has implemented a procedural maneuver that would allow the bill to come directly to the floor. The Obama administration and its allies on the issue have pushed hard against the legislation out of fear that it could derail talks with Tehran, while bill backers have objected to characterizations of the bill and its intentions. White House officials have said that President Obama would veto a new sanctions bill.

Several of the longer-term issues, such as the debt limit, will come after President Barack Obama's State of the Union address set for Jan. 28.

On the hearing front, topics include the Fed's quantitative easing program, Medicare's sustainable growth rate and the coal industry.

Regarding energy policy, on Tuesday, Sen. Lisa Murkowski (R-Alaska), gives a speech on energy policy and issues a "white paper" on the topic. Murkowski and other officials from oil and gas states like Alaska and Louisiana are seeking faster federal approval of natural gas exports. The most closely watched parts of the speech and paper will be what Murkowski, the Senate Energy Committee's top Republican, says about exporting US crude oil. Meanwhile, Republicans will continue to charge the administration with waging a war on coal this week at an oversight hearing held on Thursday by the House Natural Resources Committee. The hearing will focus on controversy surrounding the Obama administration's rewrite of the stream buffer zone rule, an environmental regulation designed to protect streams from debris generated by mountaintop-removal coal mining, and will spotlight an investigation by the Interior Department's Office of the Inspector General into administration efforts to amend the rule.

Friday looms large on the economic side as that’s when the key December Employment report will be issued. That update will be read closely for any impact it might have on the Fed’s tapering of asset purchases. In November, nonfarm payrolls grew by 203,000 as the unemployment rate dropped to 7 percent, besting economists' expectations for growth. Friday's numbers, which the Bureau of Labor Statistics will release at 8:30 a.m., will show whether that momentum continued through the end of the year. But heading into Friday, there will be other updates on the economy including Factory Orders and ISM nonmanufacturing data on Monday, International Trade on Tuesday with the private sector ADP jobs report, Consumer Credit and FOMC minutes due out Wednesday. Thursday’s schedule includes weekly jobless claims and the Philadelphia Fed report and Friday also features Wholesale Trade data. Plus, there will be Fed official appearances for markets to focus on, including San Francisco Fed’s Williams on Tuesday, Kansas City Fed’s George on Thursday along with Minneapolis Fed’s Kocherlakota and the week wraps up with St. Louis Fed’s Bullard on Friday. In addition, Chinese economic updates and any developments on the euro zone economic side could also be market sensitive as trade volume should return to normal after two holiday shortened weeks in a row.

For agriculture, Friday will also be a big day with the Annual Production Summary, Quarterly Grain Stocks, Supply/Demand and Winter Wheat Seedings reports. Leading up to Friday, ag trade data will be updated on Tuesday with the China corn watch continuing via the Weekly Export Sales report on Thursday. How the weather forecast shapes up for Plains HRW wheat areas will also be important for markets. As with financial markets, trade volumes should return to more normal levels in the first full trading week in two weeks.

Monday, Jan. 6
Congress: Senate returns from holiday recess.
Yellen confirmation: The Senate is expected to confirm Janet Yellen's nomination as head of the Federal Reserve.
Treasury Secretary Jacob Lew during the first part of this week visits France, Germany, and Portugal for economic talks.
Future of farming: The Oxford Farming Conference at the university’s examination halls includes a speech by EU commissioner for agriculture and rural development Dacian Ciolos (to January 8).
Economic reports: Factory Orders | ISM Non-Mfg Index | Selected Interest Rates (Federal Reserve)
USDA reports: Export inspections (AMS)

Tuesday, Jan. 7
House lawmakers return from holiday recess.
President Obama will press for reinstatement of jobless benefits at a White House event.
Federal Reserve: Boston Federal Reserve Bank President Eric Rosengren speech on the economic outlook in Hartford, Connecticut. San Francisco Federal Reserve Bank President John Williams speech on the economy and monetary policy in Phoenix.
Energy trade and policy: Brookings Institution will hold a discussion on the future of energy trade and its implications on US economy and national security. Participants include Sen. Lisa Murkowski (R-Alaska).
Economic reports: ICSC-Goldman Store Sales | International Trade
Energy reports: Weekly Petroleum Report (API)
USDA reports: Weekly Weather & Crop Bulletin (WAOB) | Latest US Agricultural Trade Data (ERS)

Wednesday, Jan. 8
Federal Reserve releases minutes of its Dec. 17-18 meeting, where officials decided to start tapering. Details could reveal the potential pace of tapering over the first half of 2014.
Bank of England holds monetary-policy committee meeting.
State of US business: US Chamber of Commerce will hold its annual event on the state of American business. Participants include Thomas Donohue, president and CEO, US Chamber of Commerce.
EU agenda outlined: The European Commission and the Greek EU presidency hold a joint meeting in Athens. Greece took on the EU presidency for six months at the start of the year. Members of the European Commission, including president José Manuel Barroso, and the Greek cabinet, including prime minister Antonis Samaras, are due to present the work program. Greece’s finance ministry has said its government would run its presidency of the Council of the EU on a shoestring budget of €50 million.
Bank holding companies: Subcommittee hearing. Senate Banking, Housing and Urban Affairs — Subcommittee on Financial Institutions and Consumer Protection. discuss government support for bank holding companies. The hearing will focus on a Government Accountability Office report regarding the topic.
Energy reports: Weekly Petroleum Status Report (EIA) | Weekly ethanol plant production (EIA).
Economic reports: Weekly Mortgage Rates (Freddie Mac) | ICI weekly money market mutual fund data Weekly mortgage applications (Labor Dept.) | ADP Employment Report | FOMC Minutes | Consumer Credit
USDA reports: Livestock & Meat International Trade Data (ERS) | Broiler Hatchery (NASS) | National Dairy Products Sales Report (AMS) | US Agricultural Trade Data Update (ERS)


Thursday, Jan. 9
European Central Bank's governing council meets to set monetary policy for the euro zone. No change is expected.
Federal Reserve: Kansas City Federal Reserve Bank Esther George speech on banking and the economy, Madison, Wisconsin. Minneapolis Federal Reserve Bank President Narayana Kocherlakota participates in public town hall in Minneapolis.
Abe visits Africa: Japanese prime minister Shinzo Abe starts an African tour (to January 15) and heads a business delegation with trade and investment on the agenda when he visits South Africa, Mozambique and Côte d’Ivoire, the first time a Japanese minister will visit a French-speaking African country.
Reducing government waste: Committee hearing. House Oversight and Government Reform Committee.
Permanent sustainable growth rate (SGR) fix: Subcommittee hearing. House Energy and Commerce — Subcommittee on Health hearing titled "The Extenders Policies: What Are They and How Should They Continue Under a Permanent SGR Repeal Landscape?"
Coal production regulation: Committee hearing. House Natural Resources Committee. The hearing will focus on a report released by the Department of the Interior's Office of the Inspector General.
Federal Reserve oversight: Subcommittee hearing. House Financial Services — Subcommittee on Monetary Policy and Trade. The focus will be on the international impacts of the Federal Reserve's quantitative easing program.
Transportation: Weekly Traffic of Major Railroads (Assn. Of American Railroads) | Grain Transportation Report (AMS).
Energy reports: Weekly US underground natural gas stocks (EIA)
Economic reports: Jobless Claims (Labor Dept.) Phila Fed Survey (annual revision)
USDA reports: Export Sales (FAS)


Friday, Jan. 10
Federal Reserve: St. Louis Federal Reserve Bank President James Bullard speech on the economy and monetary policy in Indianapolis.
Exploration of Atlantic Outer Continental Shelf: Subcommittee hearing. House Natural Resources Energy and Mineral Resources Subcommittee will discuss seismic exploration and the future of the Atlantic Outer Continental Shelf.
Economic reports: Employment | Wholesale Trade
USDA reports: WASDE (WAOB) | Winter Wheat Seedings (NASS) | Rice Stocks (NASS) | Grain Stocks (NASS) | Crop Production – Annual Summary (NASS) | Crop Production (NASS) | Cotton Ginnings (NASS) | World Agricultural Production (FAS) | Oilseeds: World Markets and Trade (FAS) | Grains: World Markets and Trade (FAS) | Cotton: World Markets and Trade (FAS) | Peanut Prices (NASS) | Season-Average Price Forecasts (ERS)


NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.






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