Washington Insider-- Thursday
Slow Economic Rebound Keeps Focus on Fiscal Aid
Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.
Trump Suggests Halting Cattle Imports
In announcing farmer aid efforts, President Donald Trump Tuesday also singled out cattle imports as a recent topic of discussions in the administration.
“Today where we take some cattle in from other countries, because we have trade deals, I think you should look at terminating those deals,” he said. “There are some countries that are sending us cattle for many years," he said. "We're very self-sufficient, and we're becoming more and more self-sufficient.”
He also asked USDA Secretary Sonny Perdue as to why the U.S. was bringing in cattle. Perdue responded by emphasizing existing U.S. trade relationships and noting that countries exporting cattle to the U.S. have “been working with us for many years.”
While agreeing with Perdue’s assessment, Trump said, “generally speaking, unless this is a country that really has been with us, we shouldn’t be taking their cattle … and that’s the way we’re going to handle it.”
The National Cattlemen’s Beef Association indicated in a statement they said the situation underscores the complexity of the U.S. trade situation.
USDA Sets Details of CFAP Sign-up
USDA unveiled the Coronavirus Food Assistance Program (CFAP) details, providing a list of eligible commodities, those commodities that are not eligible, payment limits and other information on the effort that will provide $16 billion in direct payments to farmers and ranchers suffering at least a 5% price decline over a specified period.
USDA has not provided a lot of specifics on how the payments will work, creating confusion in the ag industry. The fact that two pools of money are being used is causing confusion. Those pots of money include $9.5 billion under the Coronavirus Aid, Relief, and Economic Security (CARES) Act and $6.5 billion in authority under the Commodity Credit Corporation (CCC) Charter Act.
There are two payment rates involved in the calculations for what are labeled non-specialty crops such as corn, soybeans and more.
There is also a list of commodities that were not deemed eligible as they had not suffered a 5% decline in prices over the period from mid-January to mid-April, but USDA will seek comments on crops excluded and may add them into the mix down the road.
Washington Insider: Slow Economic Rebound Keeps Focus on Fiscal Aid
Bloomberg is reporting this week that high U.S. unemployment likely means “that the chance of an immediate economic bounce back from the coronavirus appear slim.” As a result, lawmakers are said to agree they’ll need to provide further fiscal aid, even as partisan rifts remain over how and when to act.
Unemployment is expected to average 15.1% in the second quarter and 15.8% in the third quarter of 2020, before gradually dropping to 8.6% in the last quarter of 2021. It is projected to average 11.5% in 2020 and 9.3% in 2021.
CBO reported this week that U.S. real GDP is projected to contract by 11.2% in the second quarter of 2020 and by 5.6% for the year.
The longer-term unemployment projections are slightly more optimistic than those CBO released in April but they still portend high unemployment rate for more than a year and a half.
The report “makes it clear that we are facing a severe and prolonged economic downturn and Congress must keep pushing forward to fight the pandemic, soften the blow to our economy, and stand with the American people to build a strong recovery,” House Budget Chairman John Yarmuth, D-Ky., said.
Congressional Republicans continue to say they aren’t in a rush to pass another economic package, while House Democrats continue to call on the Senate to take up its $3 trillion measure. A proposal from Speaker Nancy Pelosi, D-Calif., to extend increased unemployment benefits through January 2021 will likely face resistance from Republicans, who are concerned that the extra $600 per week will encourage workers to stay home and slow the reopening of the economy, Bloomberg said.
However, the report also says that Republicans don’t plan to oppose additional legislation indefinitely, but believe they need to assess what already has been done and “discuss the way forward,” Senate Majority Leader Mitch McConnell, R-Ky. told the press this week.
There will need to be some sort of additional federal support “for several months,” Sen. Marco Rubio, R-Fla., said at a conference hosted by the American Enterprise Institute last week. Rubio, chairman of the Small Business Committee and a key proponent of aid to small businesses, said business closures, limited international travel and a lack of consumer confidence likely will be a damper on the economy “for a while.”
There is a risk of long-term economic damage because of the virus, Federal Reserve Board Chairman Jerome Powell told lawmakers at a Senate Banking Committee virtual hearing at midweek. He said he’s concerned about “the risk of lasting damage to the productive capacity of the economy, as a result of longer-term unemployment, and from unnecessary, avoidable insolvencies by small- and medium-sized businesses. Those two things create a real risk.”
Growth is expected to rebound in the third quarter of the coming year, when CBO projects 5% real GDP growth. But economic output is still projected to be lower throughout 2020 and 2021 than it was at the end of 2019.
CBO estimated the leisure and hospitality sector shed 48.3% of its jobs, 8.6 million lost in total, in March and April.
Bloomberg also commented that Congress may need to step in to help the U.S. Citizenship and Immigration Services “to prevent the agency from furloughing workers,” acting Homeland Security Secretary Chad Wolf told the Chamber of Commerce this week. USCIS pays for 97% of its budget with fees, but those monies have fallen off “significantly” during the coronavirus, Wolf said.
“We’re going to need some help from Congress on making sure that USCIS does not have to furlough individuals and can keep them running.” Wolf said. He wants to be able to pay the cash back once receipts come back as the economy reopens, he said.
In the meantime, Progressive House Democrats say they are looking to cut defense spending in the face of the pandemic, arguing they have the votes to defeat the fiscal 2021 defense authorization legislation if House Armed Services Committee leaders don’t reduce Pentagon’s funds from this year’s $738 billion. Nearly 30 Democrats, led by Progressive Caucus Co-Chair Mark Pocan, D-Wis., are demanding the reduced budget in a letter this week.
So, we will see. Clearly, there is still strong support for shoring up coronavirus damaged economic sectors. At the same time, push-back appears to be growing with each new proposal, although the team of Federal Reserve Chairman Jerome Powell and key administration officials appears to be able to continue to provide crucial support to a number of the main stressed sectors to aid coronavirus recovery Washington Insider believes.
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