No End in Sight to Partial Gov't Shutdown

Posted on 01/03/2019 6:44 AM

Democrats to take control of House today with Pelosi expected to be speaker


Settle in for a lengthy partial halt of the U.S. government, based on the continued impasse evident at Wednesday's White House meeting on the matter. Rep. Nancy Pelosi (D-Calif.), the likely new House speaker, today will bring two spending bills to the floor for a vote. The Democratic legislation would fully fund the government, but will not include the money Trump wants for the border wall, meaning it is dead-on-arrival. Senate Majority Leader Mitch McConnell (R-Ky.) said Wednesday that his chamber will not take up the legislation, calling it a “total non-starter,” adding, “We’re not interested in having show-votes in the Senate.”
     One hundred new House members will be seated today. Sixty-three of those are Democrats, who will have a 235-199 majority, with one seat in North Carolina remaining vacant amid allegations of election fraud.
     Eight new members will be sworn into the Senate, where Republicans will expand their majority from 51-49 to 53-47.
     What do U.S. soybean producers and Apple iPhones have in common: a lack of hefty sales to China. Apple CEO Tim Cook is blaming the company’s poor returns partially on the U.S.-China trade war.
     USDA to decide Friday on whether to delay release of January 11 reports. USDA will make a decision on Friday on whether it will delay the series of USDA reports scheduled for release January 11, USDA Chief Economist Rob Johansson told Reuters. "Right now, we have still got time to get them done, if we get funding restored. We are still hoping for that," Johansson said. If the government is still shut down on Friday, Johansson said the report releases would be delayed. "It takes us a bit of time to put them together. So even if we get funding next week ... we will still need to have a little bit of time to pull together the analysis to put those reports together and get them out," Johansson said. Pro Farmer sources have signaled USDA analysts will still need around a week to analyze all the data gathered for the reports, including the Annual Summary, Grain Stocks, Winter Wheat and Rye Seedings from NASS and the World Board's WASDE.

 

No spending deal between Trump, congressional leadership. No deal emerged on Wednesday from a White House meeting between President Trump and the congressional leadership of both parties, with the president saying there is no end in sight to the partial government shutdown.

Democrats plan to fund nearly all the shuttered agencies with full-year appropriations and kick the can on Homeland Security Department (DHS) spending to give more time for border negotiations. House Democrats today will vote on two measures after new members of the 116th Congress are sworn into office. The House will vote on a consolidated package of bipartisan bills that came out of the Republican-controlled Senate Appropriations Committee to provide full fiscal 2019 funding for the departments of Transportation, Housing and Urban Development, State, Interior, Agriculture, Treasury, Commerce and Justice, and several independent agencies such as the Environmental Protection Agency, Office of Personnel Management and General Services Administration. That bill would include a 1.9% pay raise for federal workers in 2019. The House is also expected to pass stopgap funding through Feb. 8 for DHS. A continuing resolution at DHS would continue the fiscal 2018 appropriation level of $1.3 billion for new border security measures.

More than 345,000 federal employees are currently on furlough without a guarantee of back pay, while an additional 500,000 are working but facing delayed paychecks.

Trump has rejected the Dems' proposals, however, as they do not provide the $5 billion he requested for fiscal 2019 for his proposed wall along the U.S.-Mexico border.

Senate Majority Leader Mitch McConnell (R-Ky.) reiterated on Wednesday he would not bring up any bills in the chamber until Trump signals his support for them. “The Senate would be glad to vote on a measure that the House passes that the president will sign. But we’re not going to vote on anything else,” he said as he returned from the White House meeting. “I don’t think any particular progress was made today,” McConnell said of Wednesday's meeting at the White House, adding he was hopeful all sides could reach an agreement in the “coming days or weeks.”

Trump asked congressional leaders to return to the White House on Friday. “Could be a long time and it could be quickly,” Trump said of the shutdown. “It could be a long time. It’s too important a subject to walk away from.”

Spate of government nominations cleared by U.S. Senate in final hours. The Senate Wednesday night approved a total of 77 nominees to positions in the Trump administration by voice vote, including 23 ambassadors to several countries. In a bid to move the nominations ahead, Senate Majority Leader Mitch McConnell (R-Ky.) removed more than a dozen federal judges from the list after Minority Leader Charles Schumer (D-N.Y.) blocked the move. However, other nominees for posts at the Departments of Interior and Energy along with EPA were not included in the package of nominations that were pushed through.

In 2020, 22 Republican Senate seats are on the line, while Democrats will defend 12 seats. Several Republicans, such as Sens. Cory Gardner of Colorado and Susan Collins of Maine, are in states that could make them vulnerable, should they align too closely with Trump on immigration and other policy.

Odds of a U.S.-China trade deal are rising because both sides have a clearer sense of each other’s goals and intentions, a former Chinese trade official said ahead of negotiations in Beijing next week. “I’m optimistic about the outcome,” said Wei Jianguo, who was vice trade minister until 2008. Both sides “have done their homework for the negotiations” and “sent positive signals,” he told Bloomberg in an interview, adding that he anticipates a deal that includes specific agreements. Trade officials from the two countries are set to sit down in Beijing next week for the first face-to-face negotiation since Trump and his counterpart Xi Jinping agreed to a 90-day truce in their trade war last month.

U.S. government agencies now have an excuse for not meeting deadlines: the partial gov't shutdown. U.S. International Trade Commission will remain shuttered until there is an agreement on reopening agencies impacted by the partial gov't shutdown. That raises the odds that it could delay the release of a highly anticipated report on the economic impact of the new U.S.-Mexico-Canada Agreement (USMCA). The commission is required to submit the report, which many lawmakers will look toward to inform their positions on the deal, by March 15. If a delay occurs, that will give congressional Democrats cover to postpone any vote on the trade pact.

EU, Japan, U.S. trade officials to meet next week... major subject: China trade policies. EU trade chief Cecilia Malmström, U.S. Trade Representative Robert Lighthizer and Japanese Economy Minister Hiroshige Sekō will meet again in Washington next week to advance their trilateral initiative to temper market-distorting trade practices. The meeting is scheduled for Jan. 9. The last time the ministers met as a group was in September in New York, where they agreed to launch a joint proposal for improving transparency and notifications for subsidies at the World Trade Organization. That proposal was presented to the WTO in November.

Reuters: Pacific Ethanol to idle portion of Aurora, Nebraska, ethanol plant. Poor ethanol production margins are prompting Pacific Ethanol to idle what is referred to as the western portion of its ethanol plant in Aurora, Nebraska, a portion of the plant that has 110 million gallons in annual capacity, according to Reuters. The firm had already shut a smaller portion of the plant last month and the idling of the western portion of the plant could last until the summer, according to the report. "We are continuously evaluating run rates. Aurora West is running," Pacific Ethanol Chief Executive Officer Neil Koehler said in an email to the news service Wednesday. But, he did not say whether the company was going to idle the plant. Pacific Ethanol has already idled around 20% of its production capacity.

Other items of note:

  • A prolonged government shutdown would likely delay billions of dollars in income-tax refunds. The Internal Revenue Service is one of the agencies that now lacks funding, and the U.S. tax collector has been operating with about 1 in 8 employees under the shutdown plan it uses outside the tax-filing season. If the shutdown drags on, early filers won’t receive the refunds they’re expecting, a gap that could put pressure on congressional negotiators and President Trump to reach a deal, the Wall Street Journal noted. By Feb. 2, 2018, the IRS had paid $12.6 billion in refunds to more than six million households. By Feb. 16, the IRS had paid $101.2 billion to nearly 32 million households. And by March 30, the IRS had paid $212 billion to 73 million households.

  • Sen. Lamar Alexander (R-Tenn.) is trying to restrain President Trump's ability to impose tariffs liberally under Section 232 of the Trade Expansion Act. Trump has defined “national security” broadly under the statute, including tariffs over the head of every U.S. trading partner even when he’s signed a new trade deal as he has with Mexico and Canada.

  • The Commerce Department has granted about 75% of requests to exclude products from levies on foreign steel that took effect in March, the Wall Street Journal reports (link), covering some 3.8 million tons of steel. But importers complain the process is inconsistent, sowing uncertainty in industrial supply chains. Some firms that make cans using tin-coated sheet steel have had nearly all their exclusions approved, the article details, while others say almost all their requests were denied.

  • AP Moller-Maersk to close China container factory, shift focus to refrigerated containers. AP Moller-Maerisk will close a shipping container factory in China and will shift its focus to producing refrigerated containers as the global demand for fresh produce and other commodities is rising, the company announced today. The Dongguan container factory has been idle since the start of December, Maersk said, noting that market for dry containers has been squeezed by increased competition.

  • China has successfully landed its Chang’e 4 spacecraft on the far side of the moon, becoming the first in history to touch the lunar surface unseen by those on Earth. China's next plan is to put astronauts on a lunar base in the 2020s and send several probes to Mars.

Markets. The Dow on Wednesday finished up 18.78 points, less than 0.1%, at 23,346.24. The S&P 500 added 3.18 points, 0.1%, to 2,510.03, while the Nasdaq Composite rose 30.66 points, 0.5%, to 6,665.94.

The yield on the 10-year Treasury note settled at 2.659%, its lowest close in almost a year. The yield, which falls as bond prices rise, tumbled back below 3% in recent weeks after reaching multiyear highs in November.

President Trump said stocks had faced a “little glitch” last month but predicted they would recover at a cabinet meeting Wednesday. “We need a little help from the Fed,” he said.

Economists at Morgan Stanley expect the economy to grow just 1.7% this year, the slowest pace since 2012, with quarterly growth declining to a low of 1% in the July-to-September quarter.

Investors are betting Fed rates will stay put. Fed-funds futures, which investors use to bet on the direction of Federal Reserve policy, showed an 91% probability that policy makers will finish the year with interest rates at or below their current level — a major shift in market sentiment.

Apple cuts its outlook over China’s slump, a reduction in its revenue forecast for the first time in 16 years, citing poor iPhone sales in China, which represents nearly 20% of Apple's revenue. The announcement highlighted the slowing Chinese economy and raised fears of further turmoil in global markets. European and Asian markets fell this morning on the news and U.S. equity futures signal a big decline today.

Fracking's secret problem: oil wells aren’t producing as much as forecast. A data analysis of about 16,000 locations operated by 29 of the biggest producers in Texas and North Dakota reveals that many oil wells are yielding less than their owners projected to investors. Link to WSJ article.


 

Add new comment