An Urban's Rural View

Goodbye, 2012. What kind of year will 2013 be for the U.S. economy and American agriculture? In my view that depends on the answers to five questions. Ready?

-- Can economic output accelerate when Uncle Sam has his foot on the brake? The economy has a lot going for it. Interest rates are low. Consumers have paid off a lot of debt. Housing starts are picking up. But fiscal policy will drag growth down, no matter how the fiscal-cliff drama ends. Among other things, the payroll-tax cut workers enjoyed the last two years is going away. That's a $1,000-a-year tax increase per employee, which the Congressional Budget Office estimates will take seven-tenths of a percentage point off the economic growth rate.

-- Will Washington play chicken again with the debt ceiling? Last time it looked like the federal government would default, the U.S. lost its triple-A credit rating, the stock market plummeted, consumers and businesses hesitated to spend and economic growth suffered. The government's debt has just hit the debt ceiling and the Treasury will run out of extraordinary measures in February. Republicans don't want to give up the leverage they think the game of debt chicken gives them, but it's an extraordinarily risky game that could end badly.

-- Will there be war in the Middle East? Iran is close to having nuclear weapons, tempting Israel to strike first. Chaos in Syria is spilling over its borders, threatening Lebanon. The Arab Spring has destabilized regimes across North Africa. If any of these bombs detonates, oil prices will soar, markets will panic and business confidence will take a hit.

-- Will the Farm Bill coalition disintegrate? If that sounds like a remote threat, remember that food-stamp opponents in Congress are maneuvering to peel off that program from the Farm Bill and subject it to separate consideration. If they succeed, one leg of the three-legged stool (hunger groups, conservation groups and farm groups) that has made Farm Bills possible collapses. If the ag committees have to go back to the drawing board in 2013, they'll likely have less money to play with and be forced to make even deeper cuts than they did in 2012. Somebody's ox will be gored. If it's conservation programs, the stool has another wobbly leg.

-- What kind of weather will Mother Nature give us? Farmers' fortunes always hang on the weather to some extent and 2013 will be no exception. Two years ago we had drought in the Southern Plains. Last year the Corn Belt crashed the drought party. In the winter issue of The Progressive Farmer, DTN Senior Ag Meteorologist Bryce Anderson says drought is highly like to be with us in 2013. But how badly, and where, exactly? Could there be precipitation surprises? I'm going to be watching DTN/The Progressive Farmer for early answers to these and other weather questions. I hope you will be, too.

Best wishes for favorable answers to all your big questions in the coming year.

Urban Lehner can be reached at urbanity@hotmail.com

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