The Week Ahead, Feb. 12-16, 2018: Trump Budget and Infrastructure Reform Proposals

Posted on 02/10/2018 5:34 PM

Senate to begin debate on immigration reform

Key focus in Washington this week is not Congress but at the White House where officials on Monday will release both fiscal year 2019 budget proposals and more details of President Donald Trump's infrastructure reform.

President Trump's budget requests for fiscal 2019 are mostly expected to be dead before arrival, especially after both congressional chambers reached agreement on a two-year budget that increased spending caps for both defense and nondefense, laying the groundwork for appropriators to fill in the details before the latest stopgap spending measure expires March 23. Some congressional panels this week will begin hearings on Trump's budget requests.

USDA officials in recent weeks have tried to cushion the blow for the coming proposed cuts for various agriculture programs, including crop insurance, with USDA Deputy Secretary Steve Censky noting that, “Congress passes spending bills.” The Trump administration last year pushed for a major reduction in domestic spending, for health programs and agriculture spending.

Last-minute OMB adjustments. A senior official with the Office of Management and Budget (OMB) said the White House is adjusting its budget request to account for Congress raising the caps on federal spending. This means more funding for “a limited set of administration priorities” but not an across-the-board increase, the official said.

The White House’s budget proposal assumes the economy can grow at a much stronger pace than independent forecasters expect and with lower inflation and government borrowing costs than officials projected last year, according to a preview of the proposal seen by the Wall Street Journal. Strong growth assumptions with relatively low borrowing costs, particularly in the back half of the budget’s 10-year forecast, help to show much smaller deficits as a share of the overall economy.

The budget proposal projects the economy will grow about 3% annually over the coming decade, the Wall Street Journal reported, although officials now expect a slightly larger near-term boost, with output rising 3.2% next year before declining to 3% in 2021 and 2.8% by 2026, according to projections reviewed by the newspaper.

A Trump administration proposal to generate $1.5 trillion in infrastructure upgrades for public works such as roads, waterways, bridges and airports is also expected to be released Monday. But details regarding funding will be sparse, and the addition of $20 billion for infrastructure in last week's budget agreement is expected to lower the odds for a major infrastructure bill anytime soon.

Funding remains the key stumbling block to getting a major bill through Congress, with the political parties and the White House at odds over the approaches to use. One approach to garnering billions of dollars for infrastructure is raising the gas tax, but that is very unlikely to be an idea from top GOP congressional leaders, even if the idea has President Trump's blessing. The 18.4¢-per-gallon user tax is not tied to inflation and has not seen a hike since 1993. With November elections in sight, GOP leaders will not risk any such tax this year, even though the U.S. Chamber of Commerce will keep pushing for a gas tax hike to 25¢, which the Chamber estimates would raise $394 billion over 10 years. While Rep. Bill Shuster (R-Pa.), chairman of the House transportation panel agrees, he can’t get other Republicans on board. Other options such as private financing and tolls do not have the funding clout to answer the spending dilemma. And after the $1.5 trillion cost of the new tax reform law, and the addition of $300 billions in new costs from last week's budget agreement, GOP leaders will not push additional debt financing, due to increased focus on the huge amounts of debt.

The Senate this week will begin debate on immigration reform, with no clear consensus on several sensitive issues within that topic. Majority Leader Mitch McConnell (R-Ky.) called up a bill that will serve as the vehicle for the promised debate over the fate of the so-called dreamers, undocumented immigrants brought to the U.S. as children (DACA).

The first procedural vote, on limiting debate on the motion to proceed to the legislation, is set for Monday afternoon.

McConnell is using a House-passed revenue measure, HR 2579, to avoid procedural issues with amendments that may have revenue components. Amendments will be considered under a 60-vote threshold for adoption, a high hurdle in the 51-49 Senate.

President Trump has said he’s willing to protect as many as 1.8 million young undocumented immigrants and offer them an eventual path to citizenship, in exchange for agreement on accompanying proposals including to curb family based policies in favor of merit plans, beefed up enforcement and funding a physical wall along much of the southern border with Mexico.

The House this week will consider two financial services bills.

First bill: Under HR 3299, the maximum interest rate for a bank loan would be preserved if it’s sold to a third party— such as a nonbank online marketplace lender —in a state with stricter usury limits. The House Financial Services Committee approved the bill by a 42-17 vote on Nov. 15, 2017.

The second bill: Nonbank financial companies labeled as systemically important financial institutions (SIFIs) would have more opportunities to challenge their designation under a modified version of HR 3978. The modified text slated for floor action would combine the SIFI provisions with five other standalone bills approved by the House Financial Services Committee, including a measure that would require the Securities and Exchange Commission to issue a subpoena to obtain source code from high-frequency traders.

Big economic week ahead. Market volatility was intense the past week with little fresh economic data to fuel the price swings. But next week will see several updates that could either increase or soothe trader tensions as readings on inflation at the consumer and wholesale level will probably get the biggest attention along with consumer activity at stores. Monday opens with the Treasury Budget statement with four updates on Wednesday — Consumer Price Index, Retail Sales, Atlanta Fed Business Inflation Expectations and Business Inventories. Thursday's schedule is even more crowded, with Jobless Claims, Philadelphia Fed Business Outlook Survey, PPI-FD, Empire State Manufacturing, Industrial Production and the Housing Market Index on the schedule. The week wraps up with Housing Starts, Import & Export Prices and Consumer Sentiment.

Light Fed schedule. So far, Cleveland Fed President Loretta Mester (2020 voter) is the only one on the public schedule with an appearance on Tuesday. But that doesn't mean more Fed comments could come out as media outlets at times will interview various officials without prior notice. The attention will remain on their views on interest rate increases ahead, but so far, few Fed speakers have been sounding an alarm bell that inflation is rising faster than they expect. And, few are expressing surprise or worry at the market volatility.

Key USDA report this week comes Thursday with more details from the Agricultural Baseline Database and Report. Other agriculture and energy-related reports on tap this week:

Monday, Feb. 12

  • Export Inspections

  • Cotton and Wool Outlook Tables:

  • Oil Crops Outlook

  • Feed Outlook

  • Rice Outlook

  • Wheat Outlook

  • North American Potatoes

  • Malaysian Palm Oil Board (MPOB) releases palm oil stockpiles, exports and production data for January

  • SGS data on Malaysia’s Feb. 1-10 palm oil exports

  • OPEC monthly oil market report

  • EIA monthly Drilling Productivity Report

  • Credit Suisse Energy Summit in Vail, Colorado (Feb. 12-15): Majority of energy companies in attendance

Tuesday, Feb. 13

  • Feed Grains: Yearbook Tables

  • Vegetables – Annual

  • France’s Agriculture Ministry gives estimates for 2018 crop areas

  • IEA monthly oil market report

  • API weekly U.S. oil inventory report

Wednesday, Feb. 14

  • Broiler Hatchery

  • Livestock, Dairy, and Poultry Outlook

  • Meat Price Spreads

  • Sugar and Sweeteners Outlook

  • FranceAgriMer updates French crop forecasts

  • U.S. weekly ethanol inventories

  • IEA-IEF-OPEC Symposium on Energy Outlooks, Riyadh, with speakers including OPEC Sec-Gen Barkindo and IEA Executive Director Fatih Birol

Thursday, Feb. 15

  • Weekly Export Sales

  • Agricultural Baseline Database and Report

  • Potato Stocks

  • Turkey Hatchery

  • EU weekly grain, oilseed import and export data

  • Strategie Grains monthly report on European grain supply, demand estimates

  • Buenos Aires Grain Exchange weekly crop report

  • Port of Rouen data on French grain exports

  • EIA natural gas storage change

  • North Dakota Department of Mineral Resources releases oil and gas production data for Dec.

Friday, Feb. 16

  • Peanut Prices

  • Farms and Land in Farms

  • U.S. decision on finalizing anti-dumping duties on Argentine biodiesel

  • Baker Hughes weekly U.S. oil/gas rig counts

Other reports and events this week include:

Monday, Feb. 12

  • President Trump releases FY 2019 budget request and infrastructure plan.

  • Brazil, Argentina closed for Carnival holidays, through Feb. 13; Japan on National Foundation Day

Tuesday, Feb. 13

  • Trump budget proposals. Senate Budget Committee hearing on President Trump’s budget proposal. Office of Management and Budget Director Mick Mulvaney plans to testify.

  • FDA animal drug user fees. Senate Health, Education, Labor and Pensions panel hearing on reauthorization of FDA Animal Drug User Fees.

  • Russia. Council on Foreign Relations holds discussion on responding to Moscow’s "intervention in U.S. democracy and growing geopolitical challenge.”

  • Ethanol. National Ethanol Conference, through Wednesday, San Antonio, Texas.

  • Farm bill. Farm Foundation forum, “The economics of the next farm bill,” National Press Club.

Wednesday, Feb. 14

  • Trump budget proposals. Senate Finance Committee hearing on Trump’s budget proposal; Treasury Secretary Steven Mnuchin to testify.

  • Trump budget proposals. House Ways and Means panel hearing on HHS’s FY 2019 budget request; Secretary Alex Azar to testify.

  • FTC seats. Senate Commerce, Science, and Transportation Committee considers three Republican nominees and one Democrat for Federal Trade Commission (FTC) seats.

  • Food aid. House Foreign Affairs Committee hearing on modernizing food aid.

  • Tax policy. David Kautter, acting Internal Revenue Service commissioner and assistant treasury secretary for tax policy, testifies before Senate Finance.

  • Earnings: Bunge, CF Industries

Thursday, Feb. 15

  • Many Asian stock markets are closed, including China’s and South Korea’s, in celebration of the Lunar New Year. Chinese mainland markets closed Feb. 15-21.

  • CFTC Chairman J. Christopher Giancarlo testifies before the Senate Agriculture Committee on pending rules, cryptocurrency regulation and state of cross-border agreements.

  • Economic Club of Washington D.C. holds discussion featuring Bank of America CEO Brian Moynihan.

  • Politics. Former Republican presidential candidate Mitt Romney is expected announce his candidacy for the Utah U.S. Senate race.

  • Transportation. House Transportation Subcommittee on Railroads, Pipelines, and Hazardous Materials hearing on positive train control (PTC) implementation that track trains and can automatically stop them before a collision. Representatives from the Federal Rail Administration, Amtrak, the Association of American Railroads and other rail groups will face congressional grilling about delays in rolling out PTC, as lawmakers react to recent deadly Amtrak crashes.

  • Rural development. House Small Business subcommittee hearing, titled “Restoring Rural America: How Agritech is Revitalizing the Heartland.” Witnesses include Kevin Kimle, who directs the Agricultural Entrepreneurship Initiative at Iowa State University, and Sam Fiorello, chief operating officer of the Donald Danforth Plant Science Center in St. Louis.

  • Earnings: Nestle SA

Friday, Feb. 16

  • CFTC weekly commitments of traders report on various U.S. futures and options contracts.

  • Russia investigation. Rep. Adam Schiff (R-Calif.), top Democrat on the House Intelligence Committee, will discuss the Russia probe and U.S. national security at Council on Foreign Relations.

  • Earnings: Deere & Co.



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