The Week Ahead: When Will U.S. Government Reopen?

Posted on 01/21/2018 8:44 AM

Dysfunctional Washington becomes more so


 

The game of politics continues in Washington, with the shutdown again showing no one wins this game. Those playing professional football will play their games on Sunday as scheduled, but those playing political games continued to spar on whose fault it was for the latest shutdown of the U.S. government.

Only a limited part of the government actually is shuttered. Expenditures for defense, interest, mandated payments for Social Security and Medicare, and “essential” functions such as law enforcement and food safety continue. Furloughed employees have always gotten retroactive paychecks, so shutdowns amount to paid holidays for them. The only certain impact on the data is that their release could be delayed, notably the first estimate of fourth-quarter gross domestic product slated to be reported Friday.

The Senate is moving towards a vote on a stopgap bill to reopen government agencies through Feb. 8. When that vote will happen depends on whether they can reach a deal. But without some kind of agreement to move up the vote, 1 a.m. ET Monday morning is the earliest that senators could vote on the stopgap bill to fund the government through Feb. 8. Senate Democrats objected Saturday to a unanimous-consent request by Majority Leader Mitch McConnell (R-Ky.) to move immediately to another cloture vote on the House-passed stopgap that would last through Feb. 16, which McConnell would then seek to amend with the shorter-duration measure.

The House is gearing up for quick action on whatever the Senate sends over. The House on Saturday adopted a rule that would waive, through the legislative day of Jan. 29, the two-thirds vote requirement to consider legislation on the same day it is reported from the House Rules Committee. The rule would also provide for motions to suspend the rules through Jan. 28.

Immigration policy continues to be a major holdup.

Nuclear option? If the shutdown stalemate continues, Senate Republicans should nix the 60-vote rule to allow legislation to pass with 51 votes, President Donald Trump tweeted Sunday. The Senate Republic Conference “opposes changing the rules on legislation,” said David Popp, spokesman for Majority McConnell. Sen. Dick Durbin (D-Ill.), the second-ranking Democrat in the Senate, said that allowing one party to pass legislation with the slimmest of majorities “would be the end of the Senate as it was originally devised and created, going back to our Founding Fathers.”

USDA activities amid shutdown. Most services to farmers would not take place, but meat inspections under the purview of the agency would continue. USDA field offices in Puerto Rico and the U.S. Virgin Islands would remain open. Link for USDA impact details.

USDA's Food Safety and Inspection Service (FSIS) would ensure meat, poultry, and egg products are safe and prevent the movement or sale in commerce of any meat or poultry products which are adulterated, according to the agency's shutdown plan. Plus, they will also provide inspection of birds and animals intended for human use and inspections of further processing of those meat and poultry products would take place. Export inspection requirements would also be verified, and other efforts would be undertaken to make sure the U.S. food supply remains safe.

USDA's Animal and Plant Health Inspection Service (APHIS) would ensure imported products do not bring pests and diseases into the US and if any disease or pest outbreaks were to happen, "appropriate emergency personnel would come back to work immediately." Care for animals at facilities would continue and staffing at National Wildlife Research Center and its associated field stations to care for the animals being studied.

Reports issued by the National Ag Statistics Service scheduled for release during a shutdown would not take place.

On the trade policy front, the sixth round of NAFTA 2.0 talks has begun in Montreal, Canada, and will end Jan. 29 when the top trade officials from each country (U.S., Canada and Mexico) confer and likely issues statements and have press conferences. The talks began Sunday with a focus on agriculture and energy and ramp up Tuesday with the arrival of chief negotiators.

Canadian and Mexican trade officials are expected to offer proposals aimed at convincing their U.S. counterparts not to put an end to the North American Free Trade Agreement (NAFTA). Negotiators’ initial focus will be on Washington’s demands for increased U.S.-made content for cars made in North America. Mexico has previously made efforts to compromise on Trump’s demands, including automobiles.

The Trump administration has proposed regional content of light vehicles made in North America be increased to 85% from the current 62.5%, and half the vehicle’s parts be U.S. made, to qualify for duty-free trade among the countries. “We agree with the position of strengthening regional content,” Mexican Economy Minister Ildefonso Guajardo said in a recent interview. One senior Mexican official said raising regional content closer to 70% could be achievable and that enhanced tracing — tracking precisely where parts come from — is being considered.

Among the proposals Canada will introduce is broadening the definition of what counts as North American content in automobiles, according to reports. Canada will propose counting North American-produced steel and aluminum toward regional content, with Canada also proposing that research and development in North America for car software should count toward the threshold required for duty-free trade.

Canada and Mexico remain opposed to more specifically U.S. content in cars.

The goal in the Montreal talks, according to Canadian and Mexican officials, is to make enough progress that U.S. President Donald Trump won’t be tempted to pull the plug on negotiations. “The president does want to improve the agreement,” a White House official said Friday. “He’s made clear he will go in a different direction if that can’t be done, but that doesn’t mean he doesn’t want to improve it.”

Timeline extended. While some observers continue to label this week's talks as make or break, President Trump told the Wall Street Journal this month that he was willing to be “a little bit flexible” on NAFTA talks given Mexico’s upcoming presidential election, scheduled for July.

Top economic report comes Friday with an update on GDP. Other key economic reports and Federal Reserve member appearances include (some subject to change if the U.S. government remains shut):

Monday, Jan. 22:

  • Chicago Fed National Activity Index

Tuesday, Jan. 23:

  • Richmond Fed Manufacturing Index
  • Chicago Federal Reserve Bank President Charles Evans to give introductory remarks at the introduction of Michael Moskow during the Chicago Council of Global Affairs conference on "The Future of Monetary Policy: Embracing the Unconventional" in Chicago, Illinois.

Wednesday, Jan. 24:

  • MBA Mortgage Applications
  • FHFA House Price Index
  • PMI Composite Flash
  • Exiting Home Sales

Thursday, Jan. 25:

  • Jobless claims
  • International Trade
  • Retail Inventories
  • Wholesale Inventories
  • New Home Sales
  • Leading Indicators
  • Kansas City Fed Manufacturing Index

Friday, Jan. 26:

  • Durable Goods Orders
  • GDP

USDA will update its food price outlook on Thursday. Other U.S. and international agriculture-related reports on tap this week include:

Monday, Jan. 22:

  • Export Inspections
  • Cotton Ginnings
  • Chickens and Eggs
  • EU monthly report on crop progress, weather conditions in Europe

Tuesday, Jan. 23:

  • Cold Storage
  • Milk Production
  • China December & 2017 commodity & energy trade data, including soybean, wheat, sugar, palm oil and corn imports
  • Agroconsult’s Brazil soybean crop tour, through Saturday. The group covers fields nearby five municipalities in Parana and Mato Grosso do Sul states

Wednesday, Jan. 24:

  • Broiler Hatchery
  • Capacity of Refrigerated Warehouses
  • EIA U.S. weekly ethanol inventories, output

Thursday, Jan. 25:

  • Weekly Export Sales
  • Food Price Outlook
  • Livestock Slaughter
  • Poultry Slaughter
  • Argentina Agriculture Ministry monthly crop report
  • Paris Grain Day in France. Speakers include representatives from Agritel, SovEcon and Mizuho

Friday, Jan. 26:

  • Peanut Prices
  • Cattle on Feed
  • CFTC commitments of traders weekly report.

Other reports and events on tap this week include:

Monday, Jan. 22:

  • International Monetary Fund releases its World Economic Outlook in press conference in Davos, Switzerland.
  • Vice President Mike Pence visits Israel.
  • International Dairy Foods Association’s Dairy Forum 2018, through Wednesday, Palm Desert, Calif.
  • National Biodiesel Conference and Expo, through Thursday, Fort Worth, Texas

Tuesday, Jan. 23:

  • World Economic Forum 2018 begins in Davos. The four-day meeting gathers the world’s business and financial elite. This year’s focus: “creating a shared future in a fractured world.”
  • Farm Foundation Forum, “The Role of Conservation Practices in Meeting Water Quality Goals,” National Press Club
  • Bank of Japan announces its interest-rate decision. Analysts expect it to begin winding back stimulus. The central bank also releases its quarterly outlook for economic growth.
  • Argentina-Russia. Argentina President Mauricio Macri has Moscow meeting with Vladimir Putin.

Wednesday, Jan. 24:

  • Brazilian court decides on an appeal by former President Luiz Lula da Silva on a corruption conviction.
  • Antibiotics. Meeting of Presidential Advisory Council on Combating Antibiotic-Resistant Bacteria.
  • Trade policy. Washington International Trade Association forum, “What's Happening with Trade Around the World?”
  • Trade policy. Cato Institute forum, “Clashing over Commerce: A History of U.S. Trade Policy”

Thursday, Jan. 25:

  • European Central Bank President Mario Draghi holds a press conference on its interest-rate decision. No change is expected.
  • Bank of Japan releases minutes from its December policy meeting.
  • Trade policy. Final decision of U.S. International Trade Commission on Bombardier/ Boeing dispute is expected. Boeing accused the Canadian company of selling its C-series jets in the U.S. below cost.
  • CFIUS. Senate Banking Committee hearing on the Committee on Foreign Investment in the United States (CFIUS).

Friday, Jan. 26:

  • President Trump is scheduled to attend the World Economic Forum, the first siting U.S. president since Bill Clinton to attend meeting. The White House will decide “day-to-day” on whether Trump, members of his Cabinet and other administration officials will attend the forum. Mick Mulvaney, director of the Office of Management and Budget, said a final decision hasn’t been made on whether Trump will travel as planned, given the shutdown. The president originally planned to arrive at Davos on Jan. 25 and make a speech to the forum on Jan. 26.

 

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