The worst drought in 50 years
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Top story: Droughted
We’re in a really, really bad drought. ”The drought that has settled over more than half of the continental United States this summer is the most widespread in more than half a century. And it is likely to grow worse. The latest outlook released by the National Weather Service on Thursday forecasts increasingly dry conditions over much of the nation's breadbasket, a development that could lead to higher food prices and shipping costs as well as reduced revenues in areas that count on summer tourism. About the only relief in sight was tropical activity in the Gulf of Mexico and the Southeast that could bring rain to parts of the South.” John Eligon in The New York Times.
Joe Romm looks at the evidence linking droughts to climate change: http://bit.ly/NHSJyo
The USDA boosted drought aid to farmers but wants Congress to act. “USDA’s latest assistance package will allow for haying and grazing to occur on Wetlands Reserve and Conservation Reserve land that have been impacted by the drought, including acres that are abnormally dry or suffering from moderate drought conditions. Until now only areas deemed to be in severe to extreme drought were eligible. The Conservation Reserve, created in 1985, pays farmers, ranchers and other agricultural producers to idle environmentally sensitive land for 10 years or more on nearly 30 million acres. Landowners who use the land for emergency haying and grazing give up a small portion of the rent they receive. In a rare move, the USDA said on Monday farmers will be allowed to sell any hay harvested on the Conservation Reserve land.” Christopher Doering in USA Today.
They also want insurers to help out. “The Obama administration is asking crop insurers to voluntarily delay charging interest on unpaid premiums to farmers stricken by the most severe drought to hit the US in at least 24 years. Tom Vilsack, agriculture secretary, said the government had urged insurance companies to forgo interest charges for a month, to November 1, for spring crops…Mr Vilsack on Monday unveiled details of the relief programme. As well as the crop insurance plan – which will give producers a reprieve from the 1.25 per cent per month interest charge – Mr Vilsack said more land would be opened up for ‘haying and grazing’ under the conservation reserve programme.” James Politi in The Financial Times.
Meanwhile, the farm bill is facing an unprecedented delay. “In the midst of a severe drought, the House Republican leaders are proposing to walk away from farm states and decades of precedent by not calling up the new five-year plan before the current law expires Sept. 30…The farm bill delay is new ground for any Congress. Never before in modern times has a farm bill reported from the House Agriculture Committee been so blocked. POLITICO looked back at 50 years of farm bills and found nothing like this. There have been long debates, often torturous negotiations with the Senate and a famous meltdown in 1995 when the House Agriculture Committee couldn't produce a bill. But no House farm bill, once out of committee, has been kept off the floor while its deadline passes. If pushed into November's lame-duck session, farmers will join Medicare physicians whose pay will be running out, idled workers worried about jobless benefits, and very likely, millions of families faced with expiring tax breaks.” David Rogers in Politico.
How droughts will reshape the United States: http://wapo.st/PD9Sey.
The drought is increasing pressure to conserve the water used in fracking. “The worst U.S. drought in a half century is putting pressure on natural-gas drillers to conserve the millions of gallons of water used in hydraulic fracturing to free trapped gas and oil from underground rock. From Texas to Colorado to Pennsylvania, farmers, activists and opponents of the technique, also known as fracking, are using the shortage of rain to push the industry to recycle water and reduce usage — efforts that could prove costly to the industry. One company, Devon Energy Corp. (DVN), estimates that recycling is as much as 75 percent costlier than pumping wastewater into deep wells. That disposal method, common in the industry, has also drawn complaints because it is linked to earthquakes.” Kasia Klimasinska and Jim Efstathiou Jr. in Bloomberg.
@billmckibben: Drought a good reminder of why wasting water on fracking is so sad
WEBBER: Drought could cause the next blackout. “We’re now in the midst of the nation's most widespread drought in 60 years, stretching across 29 states and threatening farmers, their crops and livestock. But there is another risk as water becomes more scarce. Power plants may be forced to shut down, and oil and gas production may be threatened…During the 2008 drought in the Southeast, power plants were within days or weeks of shutting down because of limited water supplies…Unfortunately, trends suggest that this water vulnerability will become more important with time. Population growth will mean over 100 million more people in the United States over the next four decades who will need energy and water to survive and prosper. Economic growth compounds that trend, as per-capita energy and water consumption tend to increase with affluence. Climate-change models also suggest that droughts and heat waves may be more frequent and severe.” Michael Webber in The New York Times.
YGLESIAS: The drought is even worse for the economy than it is for farmers. “Bad weather and ruined crops are, of course, terrible for the farmers who are afflicted. But by the same token, the resulting higher prices are a windfall for those farmers lucky enough to be outside the drought area. It's actually nonfarmers who relentlessly lose out (by paying more for food) in the drought scenario, and targeted assistance at drought-stricken farmers is simply an aggregate transfer from people who eat food to people who grow it…Policymakers can make things worse. Higher food prices will show up as increases in the Consumer Price Index and be discussed by some as ‘food inflation.’ That framing will tend to encourage central banks to raise interest rates in response, which would be a disastrous course of action.” Matthew Yglesias in Slate.
1) KLEIN: The Fed should boost the housing market. “I am convinced that there is something more the Fed can do, and that now is the right time for them to do it. I call it Uncle Ben's Crazy Housing Sale. Tomorrow morning, Bernanke could walk in front of a camera and announce that the Federal Reserve intends to begin buying huge numbers of mortgage-backed securities with the simple intention of bringing the interest rate on a 30-year mortgage down to about 2.5 percent and holding it there for one year, and one year only. The message would be clear: If you have any intention of ever buying a house, the next 12 months is the time to do it. This is Uncle Ben's Crazy Housing Sale, and you'd be crazy to miss it.” Ezra Klein in The Washington Post.
2) STEVENSON AND WOLFERS: There is remarkable consensus among economists on policy. “In reality, there's remarkable consensus among mainstream economists, including those from the left and right, on most major macroeconomic issues. The debate in Washington about economic policy is phony. It's manufactured. And it's entirely political. Let's start with Obama's stimulus. The standard Republican talking point is that it failed, meaning it didn't reduce unemployment. Yet in a survey of leading economists conducted by the University of Chicago's Booth School of Business, 92 percent agreed that the stimulus succeeded in reducing the jobless rate. On the harder question of whether the benefit exceeded the cost, more than half thought it did, one in three was uncertain, and fewer than one in six disagreed.” Betsey Stevenson and Justin Wolfers in Bloomberg.
3) SHILLER: Bubbles don’t prove the need for regulation. “A speculative bubble is a social epidemic whose contagion is mediated by price movements…After the bubble bursts, the same contagion fuels a precipitous collapse, as falling prices cause more and more people to exit the market, and to magnify negative stories about the economy. But, before we conclude that we should now, after the crisis, pursue policies to rein in the markets, we need to consider the alternative. In fact, speculative bubbles are just one example of social epidemics, which can be even worse in the absence of financial markets. In a speculative bubble, the contagion is amplified by people's reaction to price movements, but social epidemics do not need markets or prices to get public attention and spread quickly.” Robert Shiller in Project Syndicate.
4) PONNURU: Congress, not the executive branch, should give states more welfare flexibility. “If it's a good idea for the states to have more control over federal welfare dollars, Congress should give it to them. The executive branch shouldn't simply grant itself the power to ignore the law at its own discretion, even with the reassurance that it will do so only when wise. If Congress takes up this issue, it should also extend work requirements to other anti-poverty programs. Right now, food stamps and public housing lack strong work rules. Building on the success of such requirements is a cause that unites Rector, Haskins and even the liberal poverty expert Isabel Sawhill.” Ramesh Ponnuru in Bloomberg.
5) SHILLING: Higher education needs a financing overhaul. “‘This hat cost me $110K.’ That was the message a 2012 graduate displayed on her mortarboard at her university commencement. The recent flare-up over huge student-loan balances, especially among jobless recent college graduates, is exposing deep flaws in the way higher education is financed…The college-financing model worked in earlier years because of loyal alumni. American colleges and universities, notably the top private institutions, relied on graduates to contribute generously to annual campaigns, incessant capital appeals and through various trusts and bequests. Possibly except for local churches, Americans' strongest ties appear to be with their alma maters.” A. Gary Shilling in Bloomberg.
70s flashback interlude: Paul Simon plays “Homeward Bound” live on Parkinson.
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Still to come:The rise of the home prices; employers may drop coverage; the biggest school districts face declining enrollment; another veto threat; and a sneezing radio.
Moody’s downgraded its outlook on Germany. “The ratings firm Moody’s Investors Service late Monday dimmed its outlook on Germany, the euro zone’s dominant economic power and political force, further exposing the currency bloc’s fragility on a day that also saw markets drop around the world on fears about Europe. Moody’s cited the huge potential cost of a euro breakup and, alternatively, the steep bill that would be paid to hold it together…In downgrading to negative its outlook on Germany’s triple-A rating, Moody’s pointed to the vast liabilities Germany would incur in a bailout of Spain and Italy, as well as its banking system’s ‘sizable exposures’ to them. Moody’s also shifted to negative its outlooks on triple-A Netherlands and Luxembourg. Only Finland, more economically isolated than the other triple-A countries, now has a stable rating from Moody’s.” Charles Forelle and David Roman in The Wall Street Journal.
@mattyglesias: Moody’s seemingly just trolling the eurozone.
@ITVLauraK: Moody’s action leaves Finland the only country left in the eurozone with a stable outlook on its credit rating
Home prices rose from a year ago for the first time since 2007. “Home prices in the second quarter rose from the year-ago period for the first time since 2007, according to a closely watched index, the latest indication the housing market is starting to recover. The report, which is scheduled to be released Tuesday by real-estate firm Zillow Inc., found that for the quarter ending in June, home values were up 0.2% from the same period in 2011. While other indicators have shown home prices turning up since the spring, most examined short-term changes from one month to the next. Other indexes reported gains in median sales prices, which can be skewed based on the type of homes that are sold. But Zillow measures prices of comparable homes in the same community, which some economists say provides a truer picture of market trends.” Nick Timiraos in The Wall Street Journal.
The debt ceiling fight cost taxpayers more than $1 billion. “Last summer's fierce political debate over raising the federal debt limit cost taxpayers more than $1 billion in extra borrowing costs, including hundreds of hours in overtime for federal employees responsible for avoiding default, according to a new government report. Delays in raising the debt limit forced the Treasury Department to pay an extra $1.3 billion in borrowing costs — and the final sum is expected to climb higher as multi-year obligations and other outstanding costs are added later, the Government Accountability Office said in a report released Monday.” Ed O’Keefe in The Washington Post.
Senate Republicans would extend tax cuts for the rich while letting others expire. “Senate Republicans will press this week to extend tax cuts for affluent families scheduled to expire Jan. 1, but the same Republican tax plan would allow a series of tax cuts for the working poor and the middle class to end next year. Republicans say the tax breaks for lower-income families — passed with little notice in the extensive 2009 economic stimulus law — were always supposed to be temporary. But President Obama had made them a priority in 2009 and demanded their extension in 2010 as a price for extending the Bush-era tax cuts for two years, and both the White House and Senate Democrats are determined to extend them again. That sets up a potentially tricky issue for Republicans. They have said they do not want taxes to go up on anyone while the economy struggles to gain altitude, but under their plan…about 13 million families would see their tax refunds reduced, and some would see their taxes increase.” Jonathan Weisman in The New York Times.
Yields on Treasurys hit new lows. “A fresh round of bad news out of Europe meant a fresh round of records in the U.S. Treasury market. Yields on benchmark U.S. Treasurys maturing across the spectrum, from five to 30 years, dropped to new lows as a flare-up of the European debt crisis and worries about global economic growth drove investors toward the safety of U.S. debt. As prices rise, bond yields fall. The yield on the 30-year Treasury note fell the furthest, etching a new low of 2.479% early Monday, according to Tradeweb data, before rising to yield 2.517% in late afternoon trading.” Matt Phillips and Jonathan Cheng in The Wall Street Journal.
@Neil_Irwin: Thing I never thought I would see: A 2.5% yield on a 30 year Treasury bond.
The Libor probe has expanded to bank traders. “Several groups of traders are under investigation by regulators around the world for allegedly banding together to rig interest rates, people close to the probe said. The continuing criminal and civil scrutiny includes more than a dozen traders from at least nine banks, often allegedly working together in small groups to target different interest rates on separate continents, the people said…Most of the groups of traders under scrutiny are separate from the alleged collusion involving Barclays, in which regulators said traders promised bottles of Bollinger as rewards for rate-fixing. The British bank last month paid about $450 million and admitted that some traders and executives tried to fix the London interbank offered rate, or Libor, and other interest rates.” Jean Eaglesham and David Enrich in The Wall Street Journal.
Legos are excellent interlude: 65,000 LEGOs get unboxed and sorted in 3 minutes.
A study says one in ten employers will drop health coverage. “Around one in 10 employers in the U.S. plans to drop health coverage for workers in the next few years as the bulk of the federal health-care law begins, and more indicated they may do so over time, according to a study to be released Tuesday by consulting company Deloitte…Deloitte’s findings differ from estimates by rival firm McKinsey & Co. last year that found 30% of employers say they would ‘definitely or probably’ stop offering health insurance after 2014, as well as calculations by the Congressional Budget Office that estimated around 7% of workers could lose coverage under the law by 2019.” Louise Radnofsky in The Wall Street Journal.
Enrollment in the nation’s largest school districts is dropping. “Enrollment in nearly half of the nation's largest school districts has dropped steadily over the last five years, triggering school closings that have destabilized neighborhoods, caused layoffs of essential staff and concerns in many cities that the students who remain are some of the neediest and most difficult to educate…Because school financing is often allocated on a per-pupil basis, plummeting enrollment can mean fewer teachers will be needed. But it can also affect the depth of a district's curriculum, jeopardizing programs in foreign languages, music or art…The rise of charter schools has accelerated some enrollment declines. The number of students fell about 5 percent in traditional public school districts between 2005 and 2010; by comparison, the number of students in all-charter districts soared by close to 60 percent, according to the Department of Education data.” Motoko Rich in The New York Times.
Big companies are spending less on lobbying. “An increasingly idle Congress is causing atrophy in many of the nation's most muscular political forces. The 50 largest lobbying spenders, including big corporations like AT&T and trade groups like the National Association of Realtors, collectively spent about $168 million lobbying Congress between April and June — a $30 million decline from their first quarter efforts, a POLITICO analysis of new lobbying disclosures indicates. ” Dave Levinthal in Politico.
Machines doing human things interlude: A radio that sneezes to expel dust.
Wood-fired plants rack up emissions violations. “Malodorous brown smoke from a power plant enveloped this logging town on April 29, 2010, and several hundred residents fled until it passed. Six months later, the plant got $5.4 million from a federal program to promote environmentally preferable alternatives to fossil fuel. The plant, Blue Lake Power LLC, burns biomass, which is organic material that can range from construction debris and wood chips to cornstalks and animal waste. It is among biomass plants nationwide that together have received at least $700 million in federal and state green-energy subsidies since 2009, a calculation by The Wall Street Journal shows. Yet of 107 U.S. biomass plants that the Journal could confirm were operating at the start of this year, the Journal analysis shows that 85 have been cited by state or federal regulators for violating air-pollution or water-pollution standards at some time during the past five years, including minor infractions.” Justin Scheck and Ianthe Jeanne Dugan in The Wall Street Journal.
The White House threatened to veto a GOP drilling bill. “The White House on Monday waved the veto pen at a House GOP bill that would require vastly wider offshore oil-and-gas leasing…The House will vote as soon as Tuesday on the bill that requires Interior Department oil-and-gas leasing off the Atlantic and Pacific coasts, which remain off-limits for at least the next five years under the Obama administration's plans. The bill also calls for a more aggressive schedule of lease sales in Arctic waters off Alaska's coast than the Obama administration plan, which is far more cautious about Arctic development by waiting to hold new lease sales there until 2016 and 2017.” Ben Geman in The Hill.
Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.