Washington Insider -- Wednesday

Fighting the Coronavirus Shocks

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

R-CALF Blasts Perdue For Country Of Origin Labeling (COOL) Comments

USDA Secretary Sonny Perdue’s suggestion last week that voluntary labels declaring that meat is “slaughtered and processed in the U.S.” might be acceptable in lieu of mandatory Country of Origin Labeling (COOL) not surprisingly have drawn criticism from Ranchers-Cattlemen Action Legal Fund United Stockgrowers of America (R-CALF USA).

Perdue last week suggested it was an option that could pass scrutiny at the World Trade Organization (WTO), which found a previous U.S. mandatory COOL effort ran afoul of trade rules.

"This is exactly what the meatpackers and meat importers want: a label that does not identify in which country the cattle used to produce the meat were born and raised," said R-CALF USA CEO Bill Bullard.

There continues to be some labeling of U.S. beef and pork in grocery stores that indicate the meat was from animals born, raised and harvested in the U.S., but those efforts are not mandatory but reflect some grocery stores opting to not go through the expense of changing what had been mandatory labels.


USTR Announces Two Public Hearings on Imports of Seasonal, Perishable Products

Public hearings will be held April 7 in Plant City, Florida, and April 9 in Valdosta, Georgia, by the Office of the U.S. Trade Representative, USDA and the Department of Commerce.

The two sessions are planned to “hear firsthand from interested persons on trade distorting policies that may be causing harm to U.S. seasonal and perishable producers (namely, of fresh fruits and vegetables) and contributing to unfair pricing in the U.S. market, and to solicit feedback on how the Administration can better support these producers and redress any unfair harm.”


Washington Insider: Fighting the Coronavirus Shocks

The Washington Post is reporting this week that Wall Street continues to be skeptical that the Trump administration will design an effective coronavirus stimulus program. Questions are being raised about whether the package will be big enough – and whether the administration can secure congressional support for it.

The economic stakes could hardly be higher, the Post thinks after Monday’s stock market meltdown that brought markets near “bear market territory” after falling almost 20% from highs just last month. The Post’s outlook also reflected a 24% decline in oil prices; and a sharp decline in the yield on the 10-year Treasury bonds which fell below 0.4%, a new low.

Taken together, these results could be seen as a nearly “unmistakable verdict” from investors who “now expect a recession.” The Post added that a growing chorus of economists agree. This threatens a “downturn that could undermine the administration’s central argument for its reelection, the report said.

Against that “darkening backdrop,” the administration announced Monday that it was assembling a relief package to sustain dislocated workers and keep businesses afloat. It was described as a payroll tax cut as well as help for hourly workers including a short-term expansion of paid sick leave.

The administration’s comments made clear that the White House is now considering a “large and expensive government response,” the Post said and commented that this marks a sharp policy turnaround in just a matter of days. While the president had floated the idea of a payroll tax cut earlier, his economic advisers had placed the burden on the Federal Reserve for backstopping the economy. Larry Kudlow, the top economic hand, as recently as Friday pooh-poohed a big fiscal response, arguing such packages “have never really worked in the past.”

In addition, the administration can’t take congressional support for whatever it proposes for granted, the Post said. House Speaker Nancy Pelosi, D-Calif., and Senate Minority Leader Chuck Schumer, D-N.Y., outlined their preferences last weekend calling for paid sick leave, enhanced unemployment insurance, expanded food stamp benefits and “widespread and free” coronavirus testing and reimbursement for care not covered by insurance.

House Democrats are set to hear today from Jason Furman, who served as President Obama’s top economist and Claudia Sahm, a former Fed economist who specializes in recessions. Both have called for major fiscal responses – Furman is ballparking the price tag at $350 billion. And both say the benefits must be tailored to make an impact quickly for the most vulnerable, a mark they say a payroll tax cut misses.

“It would be too slow and dispersed to substantially stimulate the economy, as households would receive only a modest benefit every pay period,” Furman wrote in the Wall Street Journal last week. “The distributional effects are worrisome as well: A one-year payroll tax cut of 2% of income would provide up to a $5,508 tax cut to a high-income couple but only $500 to a single parent getting by on $25,000 a year – and nothing for a worker placed on leave without pay. This isn’t the fairest or most efficient way to increase aggregate demand.”

Senate Finance Committee Chairman Chuck Grassley, R-Iowa, is considering “targeted tax relief measures,” a spokesman said, though it is not clear what those include. And “some of his fellow Republicans are less interested,” the Post said.

Indeed, the president and his top aides continue projecting optimism that the coronavirus will prove only a short-term and limited drag on the economy in the face of evidence to the contrary, the Post noted.

The President “has spent much of the past four days tending to campaign benefactors and preoccupied with his own political future,” the report said. “He has used those settings to complain about what he considers to be coronavirus hysteria in the media and overreaction by financial markets.”

Administration officials nevertheless say that we will provide whatever tools we need and that “the economy will be in very good shape a year from now,” Treasury Secretary Steven Mnuchin said at the Monday evening press conference. “This is not like the financial crisis where we don't know the end in sight. This is about providing proper tools and liquidity to get through the next few months.”

Mnuchin’s comments drew a rebuke from Larry Summers, a predecessor at the helm of Treasury. “For the Secretary to suggest it’s all in hand is to put his credibility at some risk and I don’t think people in positions of responsibility for economic policy should ever try to be definitive about what economic outcomes are going to be,” Summers said.

Summers, who helped craft the 2009 stimulus package in the teeth of the financial crisis, said there is now “much more danger that we will do too little than we will do too much.”

Considering how low the yield has fallen on longer-term U.S. debt, “the market is begging the government to borrow money,” Jay Shambaugh, director of the Hamilton Project at Brookings, says. “Take out some insurance against big downside risk. If it turns out we didn’t need it, it’s not the end of the world.”

So, we will see. As pressure builds to “do something” about the increasingly bleak economic outlook, the fight over what that could turn out to be certainly is one producers should watch closely as the debate intensifies, Washington Insider believes.


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(CC/BAS)