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Fed Chair Powell will speak at 10 PM EST tonight on “Monetary Policy Normalization and Review” at Stanford University, CA  Watch it live here.

President and Mrs. Trump will depart the White House at 9:20 AM EST this morning for Fort Benning, GA, arriving at 11:35 AM EST.  They will spend the afternoon viewing tornado damage in Alabama.  Then they will depart for the weekend to Mar-a-Lago, arriving at 4:55 PM EST.  At 6:30 PM, the President will do a fundraiser with a 7:30 PM speech.

USTR Lighthizer will testify on March 12 before the Senate Finance Committee on the WTO outlook.  He’ll also be bombarded with questions about negotiations with China and with the EU.  I’ll forward a transcript as soon as it become available.

President Trump’s FY20 Budget will be posted here next Monday morning.  Congress is very unlikely to adopt its 5% nondefense spending cuts.  A defense increase to $750 b. may be another matter.

Treasury Secretary Mnuchin will testify on March 14 before the House Ways and Means Committee on President Trump’s FY20 Budget.  Mr. Mnuchin will probably spend a lot of his time responding to questions about turning over President Trump’s personal and business tax returns.

Acting Office of Management and Budget Director Russell Vought will testify before the House Budget Committee on March 12 on President Trump’s FY20 Budget.  There’s little chance Mr. Trump’s FY20 Budget, or even parts of it, will pass either house of Congress.

“U.S.-China Trade Deal Isn’t Imminent So No Summit Date Set, Envoy Says.”  This morning’s Wall Street Journal article leads with:

BEIJING—The U.S. and China have yet to set a date for a summit to resolve their trade dispute, the U.S. ambassador to China said Friday, as neither side feels an agreement is imminent.

“A date hasn’t been finalized” for a meeting between President Trump and Chinese leader Xi Jinping, Terry Branstad, the U.S. envoy to Beijing, said in an interview with The Wall Street Journal. He said preparations for such a meeting aren’t yet under way either.

Mr. Branstad said negotiators need to further narrow the gap in their positions, including on enforcement of an eventual deal, before summit arrangements are made.

“Both sides agree that there has to be significant progress, meaning a feeling that they’re very close before that happens,” Mr. Branstad said in his office at the U.S. embassy in Beijing. “We’re not there yet. But we’re closer than we’ve been for a very long time.”

Mr. Branstad’s remarks add to growing doubt that Washington and Beijing can speedily resolve their yearlong trade battle that has rattled global markets and businesses.

Tax Refunds totaled $142.395 b. through March 1 versus $147.577 b. during the comparable period last year, down 3.5%.  Returns with refunds processed so far total 46.416 m. versus 48.452 m. last year, down 4.2%.  The average refund has been $3,068 so far versus $3,046, up 0.7%.  Check out all of the filing season data through March 1 here.

$227 b. deficit estimated by CBO for the 2 PM March 22 Monthly Treasury Statement.  At 2 PM yesterday, the Congressional Budget Office estimated February’s deficit was $227 b. versus $215 b. in February, 2018, receipts of $171 b. versus $158 b., and outlays of $398 b, versus $371 b.

The federal government incurred a deficit of $227 billion in February 2019, CBO estimates—$12 billion more than the deficit in February 2018.

CBO estimates that receipts in February 2019 totaled $171 billion—$16 billion (or 10 percent) more than those in the same month last year. Withholding of individual income and payroll taxes increased by $10 billion (or 5 percent), thus increasing receipts. Individual income tax refunds declined by $10 billion (or 13 percent), further boosting net receipts. (However, the share of total refunds paid in February varies from year to year.) Remittances from the Federal Reserve decreased by $5 billion, or 62 percent. Last February’s remittances were boosted by an additional onetime remittance of $2.5 billion as a result of provisions of the Bipartisan Budget Act of 2018.

Total spending in February 2019 was $398 billion, CBO estimates—$27 billion (or 7 percent) more than the sum in February 2018.

According to CBO’s estimates, the largest changes in outlays were as follows:

■ Outlays for the refundable portion of the earned income and child tax credits increased by$6 billion (or 13 percent).

■ Spending for military programs of the Department of Defense rose by $6 billion (or 12 percent).

■ Social Security benefit payments rose by $5 billion (or 6 percent).

■ Outlays for Medicare increased by $4 billion (or 8 percent).

Spending for other programs and activities increased or decreased by smaller amounts.

Actual Surplus in January 2019: $9 Billion

The Treasury Department reported a surplus of $9 billion for January. CBO did not publish a Monthly Budget Review for January 2019 because some data that CBO would have used to produce the report were unavailable as a result of the federal government’s partial shutdown from December 22, 2018, to January 25, 2019.

“Overseas Contingency Operations: Trends and Issues.”  Yesterday’s 12-slide CRS, CBO, GAO presentation stated:

Since 2001, the Department of Defense (DoD) has regularly requested large appropriations to supplement its base-budget funding. Most of that nonbase funding has been designated for overseas contingency operations (OCO) that began after 9/11. CBO examined how DoD’s use of OCO funding has affected its spending.

Growth of Funding. Between 1970 and 2000, nonbase funding accounted for about 2 percent of DoD’s total spending. Since 2001, such funding has accounted for a much larger and persistent share of annual defense appropriations.

Amounts of Funding. Nonbase funding peaked at 28 percent of DoD’s budget in 2007 and 2008. From 2001 to 2018, it has averaged about $116 billion per year (in 2019 dollars), totaling about 20 percent of DoD’s total funding. 

Funding for Enduring Activities. In CBO’s estimation, from 2006 to 2018, more than $50 billion in OCO funding per year (in 2019 dollars), on average, has gone toward the costs of enduring activities rather than the temporary costs of overseas operations. DoD’s most recent budget request indicates that, beginning in 2019, the department plans to increase the base budget to include most of that enduring funding in future years.

“More Evidence of Post-ACA Slowdown in Health Care Spending.”  Yesterday’s Center for Budget and Policy Priorities blog by Paul Van de Water stated in its entirety:

New projections from the Medicare actuaries provide fresh evidence that the Affordable Care Act (ACA) has helped slow spending growth throughout the nation’s health care sector.

Under the actuaries’ updated projections of national health expenditures, both public and private health spending in 2019 will be substantially lower than what the actuaries projected in March 2010, just before the ACA’s enactment.

Medicaid shows the largest slowdown. In 2010, the Centers for Medicare & Medicaid Services (CMS) projected that Medicaid spending would reach $794 billion by 2019. Today, even with the ACA’s coverage expansions, CMS projects that Medicaid will spend just $623 billion this year or 21.5 percent less. (See figure.)

Medicare and private health insurance have also recorded large reductions. Projected Medicare spending in 2019 is 18.2 percent below what the actuaries projected before the ACA, and projected private health insurance spending is down 6.1 percent.

Political Insider

About Pete Davis

Pete Davis

Pete Davis advises Wall Street money managers on Washington, DC policy developments that affect the financial markets. Visit his website here daviscapitalinvestmentideas.yolasite.com.

Articles by Pete Davis

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