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
Global Markets
Jobs
Agricultural
Industry,
Agribusiness,
Rural America
Capital
Energy
2
2
JOBS & THE ECONOMY…

Jobs:
 http://tipstrategies.com/archive/geography-of-
jobs/
3
HOW THE ECONOMY WORKS…
4
Net Farm Income & Direct Government Payments
(1991-2013F)
net farm income
140
120
100
80
60
40
20
0
$128.2 b.
govt payments
$117.3 b.
NFI-G
Note: OK producers received $110.8 mil. in govt. payments in 2011
& $1.5 bil. in NFI; G/NFI = 7%.
2013
2011
2009
2007
2005
2003
2001
1999
1997
1995
1993
$10.9 b.
1991
$ Billion
5
US AGRICULTURAL TRADE BALANCE, 1991-2013
($MIL/FY; AGRICULTURAL PRODUCT ONLY)
$143.5 b.
Exp.
$26.5 b.
surplus
160000
140000
120000
100000
$117 b.
Imp.
80000
60000
40000
20000
0
http://www.fas.usda.gov/gats/BICOReport.aspx
Series2
Series1
7.7%
7.8%
7.8
7.7
7
US Exports of Agricultural Products
120,000,000
100,000,000
Thousands of Dollars
80,000,000
Pacific/Asia
Canada/Mexico
European Union
60,000,000
Mideast
Central, S.Ameria, &
Caribbean
40,000,000
20,000,000
2006
2007
2008
2009
Year
2010
2011
2011
8
http://www.oilnergy.com/1gnymex.htm
9
10
OKLAHOMA ECONOMY UPDATE
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.
Location Quotients, 2011, and Real GDP Growth Rates, United States
and Oklahoma, 2002-2011 and 2010-11
LQ
%chg, 2002-11 %chg, 2010-11
16%*
1%
-12%
-15%
4%*
3%
6%*
-8%
-11%*
0.3%*
37%*
4%
18%*
6%*
21%*
2%*
Total Output
Agriculture
Mining
Utilities
Construction
Manufacturing
Wholesale Trade
Retail Trade
1.38
5.78
1.33
1.01
0.91
0.88
1.08
Transportation
Information
Finance
1.11
0.61
0.59
25%*
19%
21%
0.1%
2%
-0.1%
Real Estate
Prof. & Tech. Svc
Management
Admin & Waste Svc
Educ. Svc
Health Care
0.77
0.58
0.60
1.03
0.50
0.97
15%*
24%
12%*
36%*
-3%*
33%*
-2%*
4%
0.4%*
2%
-1%
4%*
Arts & Rec
0.61
60%*
6%*
Accomm. Svc
Other Services
Government
0.88
0.98
1.37
20%*
-13%
7%*
3%
-1%
-1%
UNEMPLOYMENT RATES
SOURCE: BLS,HTTP://WWW.BLS.GOV, ACCESSED 3/6/13 @ 3:30 PM
12%
10%
8%
6%
4%
2%
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Metropolitan
Micropolitan
Non Core
State
US
UNEMPLOYMENT RATES BY COUNTY
SOURCE: BLS,HTTP://WWW.BLS.GOV, ACCESSED 3/6/13 @ 3:30 PM
EMPLOYMENT GAINS AND LOSSES
Job Gaining Industries
(Top 5 in descending order of jobs
gained)
Job Losing Industries
(Top 5 in ascending order of jobs lost)
Annual Change (Dec ‘11 – `12)
Annual Change (Dec ‘11 – `12)
Accommodation & Food Services
(6,700; 5.2%)
Health Care & Social Assistance (-2,600;
-1.4%)
Wholesale Trade (5,400; 9.0%)
Prof., Scientific, & Tech. Services (-1,400;
-2.2%)
Retail Trade (5,400; 3.2%)
Information (-500; -2.1%)
Manufacturing (5,000; 3.8%)
Other Services (-200; -0.3%)
Local Government (4,600; 2.3%)
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
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.
SEQUESTER OVERVIEW
SEQUESTRATION: REFERENCE POINT…



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
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 EXEMPTIONS
“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)
WHAT MUST BE DONE THIS YEAR…
$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

PRELIMINARY OMB ESTIMATES OF FY13 CUTS…
Funding
category
Nonexempt
discretionary
Nonexempt
mandatory
Medicare &
mandatory
selected health
programs
CRS, January 2013
Defense
Nondefense
9.4%
8.2%
10%
7.6%
n/a
2%
2012 Federal Budget (Billion Dollars)
Other, 490
Interest, 340
Mandatory,
2,079
DOD/DHS/VA,
850
2011 Budget Breakdown (Billion Dollars)
Justice
Energy
Farm Programs
Labor (no UIB)
Interior
Commerce
EPA
FBI
FAA
SBA
0
5
10
15
20
25
30
35
EXEMPTIONS FOR SELECTED USDA PROGRAMS…
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

USDA CUTS
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
RURAL PROGRAM IMPACTS

Safety Net and Income programs are exempt



Health Care cuts capped at 2%





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
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)
ESTIMATED IMPACTS ON OK
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
HOW USDA DEFINES RURAL


Currently, “rural” used as an eligibility criteria only for
Rural Development programs
Rural defined as any area other than:
i.
ii.

1.
2.
3.
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 (CONT’D.)

“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

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)