Ag Policy Update–29 Jan 03       

(Sunup Program to be aired 30 Jan 03)

 

1.     The big news this week was the President’s State of the Union.  What did you think?

–The essence of his talk goes something like this:

(1)    Bush is no longer interested in persuading the American people or the nations of the world that Saddam must disarm.  He is ready to go.

(2)    There are other issues facing America but they are secondary to putting Iraq to rest.

  

 

2.     Well, he did lay out several other issues and policy responses.  But, let’s start with the Iraqi situation.

–The President did outline his reasons for singling out Saddam and Iraq.

–He will send Secretary of State Powell to the UN 5 Feb to “consult” and make the case for why it is time to stop the inspections and move to a military response.

–Experts suggest that war could come as early as mid-February to mid-March.

 

 

3.     And what kind of economic impacts can we expect? 

–The markets have already been expressing their concern with the war scenario:

–the stock market is down

–consumer confidence is down

–oil prices are erratic

–many companies that have experienced layoffs are unwilling to invest in new growth.

  

 

4.      Once the war is underway, what’s likely to occur economically? 

–If the war follows the optimistic scenario and last only weeks or months, some experts are saying:

–the stock market will rebound

–consumer confidence will return

–oil prices will come down

–the President will turn his attention to the other issues in his speech and budget

–business and industry will begin to expand

–the world will settle into a post-war calm

–we will have military and civilian casualties.

–for agriculture, the short run will be negative, markets will improve quickly.

 

 

5.     That’s the optimistic side.  What about the less rosy scenario?

–The war and the occupation or nation-building in Iraq could drag on for one to several years.

–The cost could exceed hundreds of billions of dollars, worsening the budget deficit

–Business and consumer confidence in the economy could worsen and we could slide into another recession.

–More nations and dissidents in other countries could turn their discontent and wrath on the US, worsening our global markets and increasing the incidence of terrorist activities.

–Oil prices could increase.

 

 

6.     And more specifically, what would this mean for agriculture? 

–Because global markets could turn against us, commodity prices could decline & sales will be down.

–With the likelihood of increased incidence of terrorist activities, markets could also be disrupted and risks to food chains could be threatened.

–Cost of production could increase and profit margins will be squeezed.

–There will be less federal funds available for farm and rural problems.

 

 

7.     Of course the President would argue that the risk of doing nothing could have similar consequences. 

–That’s right, and that’s his rationale for moving forward.

–Whether or not it matters, it is now up to us to weigh these risks and decide whether we agree.

 

 

8.     So, while recognizing that the decision about war will swamp all other issues, what was your response as an economist about the rest of his agenda, starting with his economic recovery plan? 

–accelerating tax cuts

–eliminating the dividend tax

–limiting domestic spending

–offering the alternative of Social Security private  retirement accounts

 

9.    What about health care reform? 

–Medicare reform and privatized prescription drug benefits

–limiting liability on medical suits

 

 

10.   What about energy & environmental policy reform? 

–increase domestic production

–mandate air pollution reduction

–forest policy reform

–hydrogen power research

 

 

11.   And he’s calling for his compassionate aid? 

–faith-based support

–mentor program

–drug treatment

–end partial birth abortion

–ban human cloning 

 

 

12.   What about the issues he discussed under the term “human dignity”? 

–Afghanistan support

–Mideast Peace effort with Israel & Palestine

–International AIDS relief

–fight terrorism

–“bioshield” program 

 

 

13.   The domestic agenda and non-war proposals will be in the President’s new budget proposal? 

–That’s right.

–We’ll discuss them in more detail in coming months, and some compromise will take place.

–Note that he did not mention agriculture or the weather and market crises it has faced recently.

  

 

14.   Just prior to the President’s talk, the subcommittee chairs of the House Ag Committee were introduced.  Any thoughts? 

–Oklahoma’s Rep Lucas retains a subcommittee position.

–While the GOP has named its members to the committee, the Demo list is not yet out.

–Among the 27 Republican members, 8 are new to the committee.

–The Demos should announce their members soon.

 

 

15.   Congress, after a flurry of quick activity on the Senate side, doesn’t seem to be doing much with the spending bills.  Give us an update. 

–Viewers will recall the last Congress went home last fall without passing 11 of the 13 spending bills.

–The Senate has combined all 11 bills into one “Omnibus Appropriations Bill”, HJ Res 2.

–The House is still dragging its feet.

–Rather than supporting the Senate action, the House this week passed another continuing resolution to extend 2002 spending to 7 Feb.

–Some House leaders have made no secret that they prefer to not pass the spending bills, but rather continuing funding at 2002 levels.

–If House leaders succeed, ag disaster aid this year is unlikely.

 

 

16.   A summary of this week’s economic news: 

–The Fed met and chose to leave interest rates at current levels.

–The CBO increased deficit projections to $199 billion for fy03, and $145 billion for fy04.

–These projections do not take into account the pending war or the proposed Bush tax cuts and spending programs.

–Economic reports indicate that:

–durable orders are flat

–consumer confidence is down

–new home sales are up

 

 

17.  Congress:

a.      Recent activity:

–The President delivered the State of the Union address to the new 108th Session.

–The House passed CR number 8 to extend 2002 spending levels to 7 Feb. 

b.        Current/upcoming:

–wrapping up the spending bills for fy03

–Committee membership appointments, the agenda and developing a strategy for the new leadership is taking up much of the time.

–Another continuing resolution was passed in the House to continue spending until the end of the month. 

c.        2003 schedule:

–to be announced 

d.        Key issues not completed

–11 of the 13 FY03 spending bills

–Healthcare reform

–Prescription drug benefits

–Merger activities, especially in agriculture

–Emergency assistance for agriculture

–Response to economic slump

–Comprehensive energy legislation (& status of renewable fuel standards)

   

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