The Economy, Political change & the next farm bill

The US Economy: An Update The Economy, Political change & the next farm bill Dave Shideler Larry D. Sanders March 2013 Oklahoma State University

Macroeconomy & agriculture--linkages Federal Budget Jobs Agricultural Industry, Agribusiness, Rural America Global Markets Capital Energy 2

Jobs: • http://tipstrategies.com/archive/geography-of-jobs/ Jobs & the economy…

How the economy works…

Net Farm Income & Direct Government Payments (1991-2013F) $ Billion $128.2 b. $117.3 b. $10.9 b. Note: OK producers received $110.8 mil. in govt. payments in 2011 & $1.5 bil. in NFI; G/NFI = 7%.

US Agricultural Trade Balance, 1991-2013 ($mil/FY; agricultural product only) $143.5 b. Exp. $26.5 b. surplus $117 b. Imp. http://www.fas.usda.gov/gats/BICOReport.aspx

7.7% 7.8% 7.7 7.8

http://www.oilnergy.com/1gnymex.htm

Oklahoma Economy UPdate

Location Quotients, 2011, and Real GDP Growth Rates, United States and Oklahoma, 2002-2011 and 2010-11 Source: BEA, http://www.bea.gov/; accessed March 7, 2013 @ 9:30 am * This sector grew faster than the United States during the same period.

Unemployment RatesSource: BLS,http://www.bls.gov, accessed 3/6/13 @ 3:30 pm

Unemployment Rates by CountySource: BLS,http://www.bls.gov, accessed 3/6/13 @ 3:30 pm

Employment Gains and Losses Source: Compiled from OESC Economic Research and Analysis, “Oklahoma Employment Report,” December 2012

Gross Receipts to State Treasury Source: “Gross Collections Dip in February,” News Release from State Treasurer Ken Miller, March 4, 2013. http://www.ok.gov/triton/modules/newsroom/newsroom_article.php?id=222&article_id=11052

Source: “Gross Collections Dip in February,” News Release from State Treasurer Ken Miller, March 4, 2013. http://www.ok.gov/triton/modules/newsroom/newsroom_article.php?id=222&article_id=11052

Sequester Overview

If you’ve heard some pundit/politician say “the current crisis of sequestration is silly, stupid and unnecessary”, they are generally correct. If you’ve heard them say “this will have catastrophic impacts on the general economy”, they are generally incorrect. If you’ve heard them say “this will have little/no impact on the economy”, they are generally incorrect. Sequestration: Reference point…

During fiscal negotiations in 2011, a compromise was reached to allow Congress & the President time to find needed cuts/revenues to reduce the budget deficit • Part of the agreement voted on & passed by both Houses was a backstop that, if they did not find solution, sequestration would impose automatic across-the-board cuts • The idea was they would surely do anything to avoid the sequester • The deadline for sequestration was subsequently extended to March 2013 Sequestration

“Most exempt programs are mandatory, and include Social Security and Medicaid; refundable tax credits to individuals; and low-income programs such as the Children’s Health Insurance Program, Supplemental Nutrition Assistance Program, Temporary Assistance for Needy Families, and Supplemental Security Income. [child nutrition programs, commodity supplemental food, Commodity Credit Corp (commodity support programs & certain conservation programs*] Some discretionary programs also are exempt, notably all programs administered by the Department of Veterans Affairs. Also, subject to notification of Congress by the President, military personnel accounts may either be exempt or reduced by a lower percentage.” Special rules may also limit cuts to selected programs, such as Medicare. (CRS, Jan 2013) Sequestration Exemptions

$85 billion in cuts required; half from defense; half from non-defense federal programs Across-the-board Noted exemptions, make cuts in non-exempted programs deeper Expect 5-10% cuts in non-defense programs if sequester goes into effect Details unsure; awaiting OMB instructions What must be done this year…

Preliminary OMB estimates of fy13 cuts… CRS, January 2013

SNAP, Child nutrition programs, commodity supplemental food programs • Programs supported by CCC: “…commodity loan contracts entered into before the sequestration order shall not be reduced.” • “it is unclear whether the Section 256 special rule applies to any of the more recent farm commodity, conservation, and other programs that are funded by the CCC.” (CRS, January 2013) • Farm Credit Operating Expenses Fund & Insurance Fund, Biomass Energy Development, FCIC Fund Exemptions for selected USDA programs…

Secretary has indicated that this year’s Direct Payments will not be cut, but… • Suggested furloughs, esp. w/meat inspectors • NASS suspends some reports • Also, moving some WIC applicants to waiting lists because of cuts • State/field offices could face furloughs • Delays in responding to queries/assistance • Delays in processing paperwork • Delays in checks • Freeze in hiring replacements USDA cuts

Safety Net and Income programs are exempt • Includes Medicaid, SNAP, CHIP, Child Nutrition Benefits, TANF, SSI, Social Security programs, Veterans Benefits • Loan obligations made prior to March 1, 2013 under Low-Rent Public Housing • Health Care cuts capped at 2% • Medicare service provider payments reduced by 2% • Community health centers • Indian Health Services • Federal Payroll associated with mandatory funds (military payroll is at the discretion of the President) • Programs subject to obligation limitations in appropriation (e.g., Federal Hwy aid; Hwy Traffic Safety Grants; Motor Carrier Safety Grants, Ops & Progs; Grants-in-Aid for Airports) Rural Program Impacts

Dollar estimates unknown • Distribution of impacts will vary across state: • OKC likely to get hit hardest due to concentration of Federal activity (e.g., Tinker, FAA, Coast Guard) • Civilian employment at military installations (Enid, Lawton, Altus, Midwest City, McAlester) • Other Federal activities Estimated Impacts on OK

Currently, “rural” used as an eligibility criteria only for Rural Development programs • Rural defined as any area other than: • A city or town that has a population of greater than 50,000 inhabitants; • And, any urbanized area contiguous and adjacent to a city or town described in clause i. • Exceptions • Water and Wastewater Grants/Loans require population to be no greater than 10,000 • Community Facilities program require population to be no greater than 20,000 • Housing programs limited to 20,000 population in nometro, 10,000 population in metro counties How USDA defines rural

“Rural in Character” exception (require Undersec. approval): • Urbanized area, as defined above, that has 2 points more than 40 miles apart AND is not contiguous with a city or town of population greater than 150,000 inhabitants; • And it is within ¼ mile of an eligible rural area. • “Grandfather” clause (Housing only): An area designed as “rural” prior to 1990 but became “not rural” due to the 1990 or 2000 Censuses is able to maintain its rural status until the 2010 Census data is available, and the population does not exceed 25,000, the place is still ‘rural in character’, and it has a serious lack of mortgage credit for lower and moderate-income families How USDA defines rural (cont’d.)

Proposed definition: Anywhere except an incorporated municipality or unincorporated area greater than 50,000 total population • Allows the “Grandfather clause” to expire • Proposal to give preference in the evaluation criteria to smaller places • Unrelated, but not: Cotton County is now included in the Lawton, OK Metropolitan Statistical Area (i.e., it is now a METRO county)

The Economy, Political change & the next farm bill