Washington Insider-- Friday

Holding Back on Economic Data

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

US Food Chain Issues Targeted In Legislation

Democrats on the Senate Agriculture Committee released a bill on Wednesday which outline what they want in the next COVID-19 aid plan.

The Food Supply Protection Act would provide $5.5 billion in grants, loans and loan guarantees to help small- and medium-sized companies shift their operations to respond to COVID-19, including procuring more personal protective equipment and testing.

The proposal includes $1 billion for grants to help food banks and other nonprofits boost their capacity to handle food and $1.5 billion for more surplus food purchases, including a new clearinghouse to help connect excess products with groups that need it.

“The COVID-19 crisis has tested the strength of our nation’s food supply chain, creating a ripple effect that’s harming our families, farmers and workers,” said Sen. Debbie Stabenow, D., Mich., ranking member of the Senate Agriculture Committee, in a statement.

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Livestock Sector Challenges Noted In Fed Update

The Fed’s Beige Book report was replete with notations of pandemic-related impacts in a host of sectors. Chicago, Minneapolis, St. Louis, Kansas City and Dallas Fed banks focused their ag recaps on the livestock sector impacts from meat plans being closed or running at reduced capacity.

“With no place to deliver market-ready animals, farmers were forced to slow herd growth (including by euthanizing hogs),” the Chicago Fed noted. “On net, the supply disruptions led to higher prices and shortages of meat at grocery stores and restaurants, but lower prices for cattle and hogs.”

The Kansas City Fed pointed out, “roughly a quarter of U.S. meatpacking and food processing plants with confirmed COVID-19 cases were located in the District.”

In terms of overall ag conditions, the Chicago recap included an observation that “Farmers anticipated government programs would help during the downturn, but observers expected some distressed farms to be forced to liquidate.”


Washington Insider: Holding Back on Economic Data

In an unusual move, White House officials have decided “not to release updated economic projections this summer,” the Washington Post reported this week.

The White House normally publishes a federal budget proposal every February and then provides a “mid-session review” in July or August with updated projections on economic trends such as unemployment, inflation and economic growth.

Budget experts told the Post “they were not aware of any previous White House decision against providing forecasts in the mid-session review” in any other year since at least the 1970s.

The Post also cited two White House officials who confirmed the “data decision” reflects the fact that the novel coronavirus is causing extreme volatility in the U.S. economy “making it difficult to model economic trends.”

The decision gets them off the hook for having to say what the economic outlook looks like, said Douglas Holtz-Eakin, a former director of the Congressional Budget Office who served as an economic adviser to the late Sen. John McCain, R-Ariz.

Both liberal and conservative critics said the White House should publish its economic projections as prior administrations did, regardless of uncertainty caused by economic conditions, the paper said. The White House under President Barack Obama continued to release these numbers during the Great Recession, although they were unflattering.

The Post quoted a “senior administration official” who argued that it would be “foolish” to publish forecasting data when it “may mislead the public.”

“Given the unprecedented state of play in the economy at the moment, the data is also extremely fluid and would produce a less instructive forecast," said the official, who spoke on condition of anonymity. "Furthermore, we remain in complete accordance with the law as there is no statutory requirement to release this information, just precedent, which, when compared to our current economic situation, is dismissible.”

The magnitude of the economic impact of the coronavirus has grown by the week. The Treasury Department said earlier this month it plans to borrow $3 trillion from April through June to finance spending in response to the pandemic. The monthly deficit in April soared to $738 billion.

In fact, the Post noted, there is a growing possibility of a “W-shaped economic recovery, and it’s scary.” Mainstream economists and Wall Street forecasters have predicted unemployment could remain north of 10% through 2020 and into 2021.

Budget experts say there is no reason the White House would be unable to release its own economic projections. The Congressional Budget Office, for instance, updated its economic projections in both April and May as the coronavirus rippled through the U.S. economy.

In its 2017 mid-session budget review, the White House said it would not be providing new economic projections, but for a much different reason. It said “economic developments over the past few months do not provide a basis for changing this forecast,” using the same assumptions it had in the previous budget. In other words, it was sticking with its previous projections.

While this year’s mid-session budget will not include new projections, there is no logistical reason they couldn’t do it,” said Bill Hoagland, senior vice president at the Bipartisan Policy Center and former Republican staff director for the Senate Budget Committee.

White House officials have claimed they are being transparent about the extent of the downturn. Kevin Hassett, a White House economist, said over the recent weekend that unemployment could remain north of 10% on Election Day in November. Larry Kudlow, director of the White House National Economic Council, said last week that “the numbers coming in are not good. In fact, they are downright bad in most cases.”

Critics charge that the White House is not confronting the extent of the economic damage facing the nation. The administration has largely broken off negotiations now with Congress on an additional stimulus package, although many economists say additional stimulus is necessary, the Post said.

“They’re never going to address the problems if they put these kinds of blinders on,” said Jared Bernstein, a former economic adviser to presumptive Democratic presidential nominee Joe Biden. “Managing the economy means publishing credible forecasts.”

White House officials have defended their response to the economic downturn, citing the trillions of dollars they approved with Congress to pump into the economy.

The Post report suggests that the decision to withhold the midseason projections is a “big deal” and that agencies need good information on the economic outlook to plan. The economy today is not the economy six months ago,” said Claudia Sahm, who worked on the macroeconomic forecast underlying the budget as an economist in the White House Council on Economic Advisers during the Obama administration. “Without these forecasts, they cannot ask for the right amount in appropriations.”

So, we will see. Economic experts tend to argue that intense economic volatility supports the need for fresh economic data, rather than reducing it. So, the Trump administration can expect strong criticism for its decision. Information policies are important for modern producer operations, and decisions in this sphere should be watched closely as they emerge, Washington Insider believes.


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