Despite federal spending cuts and tax increases, U.S. consumers increased their spending last month – particularly at the local car lot.
According to the Commerce Department, retail sales increased 0.6 percent month-over-month in May, in their best showing since February.
The improvement was driven by a 1.8 percent gain in auto sales, reflecting their biggest increase in six months. But even when the volatile transportation sector is excluded, sales still rose a solid 0.3 percent.
Separately, the government reported that the number of Americans seeking initial unemployment benefits dropped by 12,000 last week to a seasonally adjusted 334,000.
And the notion of declining unemployment and increased consumer spending was cheered on Wall Street where the Dow snapped a 3-day losing streak Thursday with a gain of nearly 200 points.
Improving economic data this week have been supported by Federal Reserve policies designed to keep interest rates low. Fed policymakers will hold a two-day meeting next week that will be closely watched for signals that the Fed might scale back its monthly purchases of 85 billion dollars worth of mortgage bonds.
This week though, the focus shifted from monetary policy to that of agriculture. And as Yogi Berra once said, “it’s like déjà vu all over again.”
It felt like 2012 all over again this week as the U.S. Senate passed its version the Agriculture Reform, Food and Jobs Act.
Better known as the Farm Bill, the measure won approval Monday night with little debate. The legislation preserved much of the Senate Ag Committee language and would cost about $100 billion per year to the taxpayer.
The bill continues to green light food and agriculture programs while trimming money for environmental programs, farm subsidies and nutritional programs. The Senate would cut one-half-of-one-percent from the Supplemental Nutrition Assistance Program, or SNAP, but would not restrict eligibility for the program formerly known as Food Stamps.
That food assistance portion of the bill continues to be the most contentious, as even those who voted for the bill, like Iowa Senator Charles Grassley, admit there’s plenty of work to be done.”
Sen. Charles Grassley, R - Iowa: “The stimulus period is over. So we need to go back to the original intent of the Food Stamp bill. Because if it hadn’t been for stimulus, this Food Stamp bill wouldn’t have been expanded to great heights where it is. We’ve gone from 28 million to 49 million people on Food Stamps in about a 4-5 year period of time.”
Other critics of the Senate Farm Bill contend there’s still way too much spending.
The measure faces an uncertain future on the other side of the Capitol, but Speaker John Boehner indicated this week he would vote for the House version. Boehner’s support is seen as a major boost for the bill that never made it to the House floor last session. The Ohio republican also voted against the 2008 Farm Bill and says he still has concerns about the measure, but conceded no changes can be made if no action is taken.
With annual costs of about $78 billion, SNAP spending has more than doubled since 2008. But the House version would cut SNAP spending by three percent and make it harder for some people to qualify for assistance. Direct payments that compensate growers regardless of price or yield would also be eliminated.
Nevertheless, the group Heritage Action still believes the House version is too costly and the conservative think tank has taken to the radio airwaves to target four members of Congress, including House Ag Committee chairman Frank Lucas in his home state of Oklahoma.
The ad calls out the Oklahoma Republican for supporting the spending of a trillion dollars, calling the measure “fiscally irresponsible.”
However, more than 50 regional and national agribusiness groups expressed support for crop insurance expansion and opposition to amendments aimed at curtailing the bill’s effectiveness.
In a letter, the group stated… “Crop insurance is different than traditional farm policy and any amendments should be cautiously considered,” the letter goes on to say “As with other lines of insurance, crop insurance requires a broad pool of participants to function properly. Amendments to arbitrarily cap premium support or assign a means test for support will impact the pool of participants nationwide, both in the near term and longer term.”
The agricultural groups, including the American Farm Bureau and National Farmers Union, note crop insurance allows farmers and ranchers to secure operating capital to help feed the world.
The letter was addressed to House leadership and all members of congress.
Speaker Boehner says the Farm Bill will likely be debated this month and could make it to the floor as next week.