Washington Insider-- Friday
Fight Over Unemployment Relief
Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.
Drop In Ag Exports Sets New Record Monthly Trade Deficit
U.S. agricultural exports in June fell to $9.96 billion, the smallest since May 2016 and down nearly 4% from May, while imports eased to $11.09 billion, down 2.5% from May, setting a new monthly record trade deficit of $1.13 billion.
This marked the second month in a row for a new record trade gap for the sector that has historically recorded trade surpluses on a monthly and annual basis. June was the fourth month in a row with a trade deficit and marked the fifth out of the last six months that has happened.
The results brought cumulative ag exports for Fiscal Year (FY) 2020 to $102.22 billion against imports of $100.49 billion for a trade surplus of just $1.734 billion.
In order to meet USDA's FY 2020 ag export forecast of $136.5 billion, exports would now have to be average $11.43 billion over July-September.
To meet the ag import forecast of $130.2 billion, imports would have to average $9.9 billion over July-September.
Both forecasts will be adjusted in USDA's update due August 26, with the export outlook likely to be trimmed and the import forecast expanded, setting the stage for an annual trade deficit for agriculture, something that has not happened based on data going back to the mid-1970s.
US Will Take Action Under USMCA If Needed On Several Products
Written responses that U.S. Trade Representative Robert Lighthizer provided to the Senate Finance and House Ways and Means Committees from his June 17 appearances have been released and contain some common themes.
When it comes to dairy with Canada and labor or biotech issues with Mexico, Lighthizer repeatedly assured that his office will pursue action under U.S.-Mexico-Canada Agreement (USMCA) provisions “if necessary.”
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Relative to the Phase One agreement with China, Lighthizer also stated several times, “China's commitments to purchase U.S. food and agricultural products are annual commitments for calendar years 2020 and 2021, so we will not be able to assess definitively whether China has fulfilled these commitments for 2020 until the end of this year.”
However, Lighthizer said that they have been “following China's progress in purchasing U.S. food and agricultural products very closely and have been discussing our concerns with our Chinese counterparts as they arise. We have made it clear that China needs to find a way to satisfy all of its purchases commitments under the Phase One Agreement.”
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The Hill is reporting this week that the pandemic is exposing the flaws and shortcomings of how the U.S. provides unemployment insurance -- and that disagreement over proposed fixes are primary holdups to a new bill.
The Hill notes that the federal employment safety net includes individual systems for every state plus the District of Columbia, Puerto Rico and the Virgin Islands. More than 30.2 million Americans were on some form of unemployment insurance as of mid-July, with the Labor Department reporting a growing number of new applications in subsequent weeks.
However, the expiration last week of a $600 weekly add-on to state benefits plunged many of those vulnerable workers into financial peril.
Congressional Democrats and Trump administration officials are now deadlocked over negotiations for a broader package that's expected to include some form of federal unemployment benefits -- but how to do that is an enormous problem.
Short-staffed unemployment offices across the U.S. rely on widely differing versions of outdated technology and would face challenges from implementing either a scaled-down or more complicated approach to the weekly payments.
Economists and labor market experts also warn that any solution that emerges from the negotiations could take weeks, if not months, to get up and running, risking a potentially catastrophic fiscal cliff for tens of millions of U.S. households.
Douglas Holtz-Eakin, former director of the Congressional Budget Office and a White House economist under former President George W. Bush said that “states, collectively, seem to have not kept up the systems and we now have a big problem because of that.”
The unprecedented size and speed of the pandemic-driven economic collapse has posed a brutal challenge for state unemployment agencies. After 10 years of steady economic expansion, the labor market quickly went from the lowest unemployment rate in 50 years to the highest level of joblessness since the Great Depression.
New claims for unemployment benefits were averaging roughly 200,000 nationwide a week before the pandemic -- a manageable level for state agencies that had largely been neglected during the longest stretch of growth in modern U.S. history.
However, the coronavirus lockdowns spurred 3.3 million new claims between March 15 and March 22, a then-record that would be doubled the following week. Before the COVID-19 outbreak, the previous record was 695,000 from the first week of October 1982.
A little more than four months after the pandemic hit, state agencies are now processing roughly 2 million new claims a week for both unemployment insurance and Pandemic Unemployment Assistance, a program designed to cover those who don't qualify for typical benefits. “On some level, you can't really blame states for not being prepared for that level of onslaught,” said Michele Evermore, senior policy analyst at the National Employment Law Project.
“Usually, you see the recession starting up and state agencies say 'You know, this looks like a recession here, so let's start to staff up.' This came on all at once, so we've had these neglected, antiquated systems and then there's all these other stressors.”
Processing the massive surge of unemployment claims on shoddy technology would have been hard enough for states. Adding enhanced benefits and PUA claims to the mix strained state agencies even more.
“It took time to hire and train new staff who could deal with the volumes of the calls, and all in a pandemic, when face-to-face contact and training and being together in office were not possible,” said Julia Pollak, labor economist at job recruitment and posting company ZipRecuriter.
Now, defining enhanced unemployment benefits are among the biggest obstacles to reaching a deal on what's likely to be the last coronavirus-relief package before the election. While President Trump and Republicans are divided over how and whether to extend the federal boost, Democrats are largely united behind extending the benefits and reducing them gradually along a curve tied to the unemployment rate.
Speaker Nancy Pelosi, D-Calif., has called for including such a mechanism, known as an automatic stabilizer in the coronavirus package being negotiated.
Rep. Don Beyer, D-Va., vice chair of the Joint Economic Committee, introduced a separate bill designed to tackle economic downturns beyond the coronavirus recession that would establish a tiered system for reducing the federal benefit in line with a state's unemployment rate.
“We talked to economists all across the country and virtually everyone we talked to said this makes the most sense.”
Republicans have proposed replacing the flat $600 weekly boost with a percentage of the worker's pre-pandemic earnings in addition to what is prescribed by each state. While the wage replacement is more tailored, there is concern that making the necessary calculations for each claimant could overwhelm an already teetering system.
So, we will see. Pressures to define and implement a powerful system to avoid the worst impacts of the weakened economy are continuing to grow, but participants in the debate are increasingly dug in to defend their position -- and, time is running out. This is an extremely significant fight producers should watch closely as it intensifies, Washington Insider believes.
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