Washington Insider -- Monday

Dealing with the Coronavirus Economic Threat

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

Agriculture Considered a Critical Infrastructure Industry

As various actions are being taken by states to address the coronavirus (COVID-19) situation, including shelter-at-home orders or other restrictions, an arm of the Homeland Security Agency released a memo that outlines 16 areas that are considered to be critical infrastructure industries.

Agriculture is considered to be one of those industries, according to the Cybersecurity and Infrastructure Agency (CISA), as they say that those working in the sector are “essential, critical infrastructure workers.”

“Agriculture comprises establishments primarily engaged in growing crops, raising animals, harvesting timber, and harvesting fish and other animals from a farm, ranch, or their natural habitats,” CISA said. “Food establishments transform livestock and agricultural products into products for intermediate or final consumption. The industry groups are distinguished by the raw materials (generally of animal or vegetable origin) processed into food and beverage products.”

Further, the CISA memo indicated, “The food and beverage products manufactured in these establishments are typically sold to wholesalers or retailers for distribution to consumers.”

“If you work in a critical infrastructure industry, as defined by the Department of Homeland Security, such as healthcare services and pharmaceutical and food supply, you have a special responsibility to maintain your normal work schedule,” CISA said.

US Custom Harvesters Raise Concern on H-2A Situation

U.S. Custom Harvesters Inc. is the latest group to highlight issues that could unfold with temporary workers that enter the U.S. on H-2A visas in the wake of the State Department scaling back approvals in the wake of the COVID-19 situation.

Without those overseas workers, their businesses cannot complete their jobs, USCHI said. Closures of DMV offices in areas around the country and waiting periods mean companies “will not be able to license any drivers,” a factor as companies have workers traveling from February through December to chop and harvest crops.

With some restaurants and grocery stores closed or limiting their operations, the group said that complicates their ability to provide resources for the crews that range from five to 100 people.

“We are an essential part of the food supply chain and must be allowed to continue our work,” said Glen Jantzen, USCHI President, and owner of Jantzen Harvesting in Plymouth, Nebraska.

Washington Insider: Dealing with the Coronavirus Economic Threat

There is broad agreement among U.S. economists now that the economic downturn will be severe with the main unknowns the length of contagion and the economic policy response.

Still, Bloomberg notes that many analysts and investors are taking heart from signs of revival in the original epicenter of the coronavirus – China – and predicting a second-half upturn in the U.S. after the contagion hopefully subsides.

There also are strong signs of agreement in Congress and the administration regarding a large stimulus package, although the Senate leadership announced on Sunday that there were still some main details to be worked out.

As early as last weekend, President Trump and others had expressed confidence that they would be able to close on a coronavirus economic-relief plan that the top White House economic adviser, Larry Kudlow said, would provide a $2 trillion boost to the U.S. economy.

The economic measure is intended to “keep companies together, keep workers paid, so they can live and sustain,” President Trump said earlier in the week. On Saturday, Larry Kudlow told reporters as he arrived for White House talks that the spending bill itself is expected to total $1.3 trillion to $1.4 trillion, plus additional loans that would eventually be paid back, for a total economic impact of about $2 trillion.

“The package is coming in at about 10% of GDP. It’s very large,” Kudlow said.

Press reports indicate that Treasury Secretary Mnuchin and Senate Democrats have been working closely to expand the GOP’s basic economic building blocks to provide the Democratic votes needed to pass both chambers of Congress and gain the President’s signature. “The building blocks of this thing are pretty much in place,” said No. 2 Senate Republican John Thune of South Dakota.

A $1.4 trillion third-stage package would be dramatically higher than the 2008 economic rescue plan that was designed to address the banking-based financial crisis. That package included $700 billion – and would be valued at $841 billion in today’s dollars.

“This is going to be the largest, when it’s concluded, relief package in history,” Sen. Bob Menendez, D-N.J., said. “So yes, speed is necessary. But getting this done right so that it actually has the effect that we want is equally as important.”

One detail that was being discussed on Sunday was a push by Democrats to fund an increase in weekly unemployment benefits by about $600 across the board. Though states administer unemployment compensation, the federal government has provided additional funds to temporarily expand it in the past, including the aftermath of the 2008-2009 financial crisis.

That portion is intertwined with the GOP Senate plan to provide $1,200 in tax rebates to most individuals. Mnuchin has proposed two $1,000 checks for individuals at a cost of about $500 billion – substantially more generous than the GOP bill. Lower income filers are expected to receive the highest rebate benefit, rather than a tiered one that gradually increased, as in the original Senate GOP proposal.

A second tough issue involved Democrats’ agreement with the Treasury Department’s push to expand the Federal Reserve’s authority for an emergency credit facility to be managed by Treasury that Democrats want to be much broader than the administration’s proposal to backstop large companies and expand the Fed’s legal authority to support distressed state and local governments, something Republicans object to.

“I don’t think we should be bailing out governments right now,” said Sen. Richard Shelby, R-Ala., chairman of the Senate Appropriations Committee and former chair of the Senate Banking Committee. “We should be trying to get to mitigate the economic fallout and find a solution to the health situation.”

In addition, a group of airlines said in a letter to congressional leaders Saturday that they won’t furlough workers through the end of August if Congress provides $29 billion in grants. The letter pushes back on the Senate Republican proposal to give them $58 billion in loans, with no grants. The industry initially requested $29 billion in grants and $29 billion in loans.

It wasn’t immediately clear whether the $1.4 trillion figure cited by Kudlow on Saturday included a $45.8 billion supplemental spending proposal from the White House. It includes $8.3 billion for the Department of Defense to protect service members, about $11.5 billion for the Department of Health and Human Services, and $3.4 billion for the Centers for Disease Control and Prevention.

House Democrats have pushed for the supplemental to be included in this “phase three” bill, but they also believe the request was not big enough, House Appropriations spokesman Evan Hollander said. “One of the goals in this package is to do everything we can to not have to do a phase four,” said GOP Senator Kevin Cramer of North Dakota. “That’s why I think you’re going to see a really big bill.”

So, we will see. It is true that some of the remaining details that need to be agreed before the deal is fully complete are quite sensitive – but there does appear to be strong political support for the overall massive relief package of the type being prepared. Certainly, this is an economic intervention that is far larger than those in the past and deserves close scrutiny as the Congress and administration prepares to try to deal with this new pandemic threat, Washington Insider believes.

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