Washington Insider-- Thursday

The US Economy Needs More Support Than Originally Thought

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

US, China High-Level Talks Set For August 15

U.S. Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He will participate in talks August 15 to assess the progress of the Phase One agreement with China, according to sources quoted by the Wall Street Journal.

The two will meet via videoconference with the focus expected to be on China's purchase commitments of U.S. agriculture, energy and manufactured goods while China is expected to raise the issue of the U.S. cracking down on Chinese tech companies.

This comes as China's Ambassador to the U.S. Cui Tiankai on Tuesday observed that the COVID-19 situation has impacted normal trade flows. Tiankai also commented that the “two economic teams have been in contact with each other,” a view that our trade sources have repeatedly signaled. He also noted that China was “doing its best to implement the deal.”

The session also comes as Chinese President Xi Jinping and other top leaders are set to meet for two weeks in the Chinese resort town of Beidaihe, a session typically aimed at discussing strategies and setting policies for key issues.

Stabenow Will Not Back More Ag Aid Without Nutrition Funding Bump

Senate Ag Committee Ranking Member Debbie Stabenow, D-Mich., on Tuesday reiterated her stance to Politico that she will not back any additional aid for farmers and ranchers in the next COVID-19 aid plan unless there is an increase for the Supplemental Nutrition Assistance Program (SNAP).

“There's not going to be more if we can't help hungry families,” she told Politico. “I've made it very clear that I will object to anything else being done in the agriculture space if we do not get a basic increase in SNAP.”

This is a stance that Stabenow has taken since late July as the Senate plan was being developed.

However, she noted it appears Republicans are “now indicating an openness” and that there are “good discussions going on right now.” Her frustrations are tied to USDA so far not doling out most of the aid in the CARES Act that was passed in March. She said she wants to keep the aid mix around 50-50 for farm aid and nutrition assistance. “I'd like to keep it in that range,” she noted.

Stabenow has been critical of USDA aid efforts, in particular the Market Facilitation Programs run for 2018 and 2019, maintaining that aid was unevenly distributed across the sector and was tilted toward farmers that had not suffered huge trade losses.


Washington Insider: The US Economy Needs More Support Than Originally Thought

Bloomberg is reporting this week that work on the next coronavirus subsidy bill has intensified – but that White House and Democratic negotiators driving toward a deal on a final package still must overcome a raw mix of election-year pressures, internal GOP splits and a profound lack of trust between the parties.

The report said that the president's sinking poll ratings amid the virus's resurgence have Democrats sensing they have leverage—and are boosting internal Republican tensions over additional aid spending on top of the almost $3 trillion previously approved.

Speaker Nancy Pelosi, D-Calif., and Senate Minority Leader Chuck Schumer, D-N.Y., have recently been playing “hardball,” dismissing out of hand smaller-scale proposals floated by the president's chief of staff, Mark Meadows, as well as a $1 trillion plan cobbled together by Senate Majority Leader Mitch McConnell, R-Ky.

Both sides declared they were making progress on Tuesday as they started to exchange detailed offers and agreed on a goal of reaching a deal by the end of the week, teeing up possible votes next week.

The negotiations on new subsidies are expected to continue after Pelosi and Schumer meet with the postmaster general later in the week in an effort to provide aid for the Postal Service and state governments. This is an effort to support for vote-by-mail operations, a top Democratic priority opposed by the president who has blasted the use of mail-in ballots for weeks.

Instead of McConnell or Treasury Secretary Steven Mnuchin, who has previously cut several deals with Democrats, the administration's lead negotiator for this round is Meadows, the former House Freedom Caucus chairman. Senate Appropriations Chairman Richard Shelby, R-Ala., praised Meadows for being engaged with lawmakers but noted his inexperience in such talks. “This is his first deal,” Shelby said.

Meadows initially proposed a stripped-down plan tying unemployment and school aid while negotiations continued, but Democrats are insisting on a bigger plan that they say “meets the moment.” In turn, he has floated potential executive actions Trump could take on his own if the talks break down.

In an indication of the seriousness of the current debate, The Hill said, is the fact that Senate Republicans expect to remain in session next week if the negotiations over the "impasse" continue. A new schedule, described by GOP senators on Tuesday, means the Senate would be in Washington for at least the first week of a previously scheduled four-week break that had been expected to start on Friday.

The House left town last week. House Majority Leader Steny Hoyer, D-Md., has said he will call House members back to Washington with a 24-hour heads-up once there is an agreement ready for a vote.

McConnell hasn't announced a change to the Senate's schedule. Asked about being in session next week, a spokesman for the GOP leader said, "the Leader will let everyone know when we have an update and/or guidance."

Negotiators continue to assert that they are making progress in the most recent talks but that “they still remain far apart on significant sticking points like unemployment insurance, state and local aid and McConnell's red line of liability protections for businesses.”

In the meantime, pressure on Congress to complete the new package was boosted by comments by Fed officials this week who said the U.S. economy needs more support than originally thought and that “it's becoming quite clear that the virus will be with us longer and more vigorously than anyone had hoped for,” Mary Daly, president of the Federal Reserve Bank of San Francisco said. The level of support that the economy is going to need just has to be higher, she said.

“As we get more information about how the virus will affect the economy, we will be thinking about how can we use forward guidance to telegraph to people, to signal to markets, households and businesses what our intentions are in terms of supporting the economy going forward,” she said.

During the last expansion, the Fed saw joblessness fall well below what it had estimated to be full employment. At the same time, inflation never consistently reached the central bank's 2% goal. This lesson can guide policy makers in the recovery from the coronavirus crisis, Daly said.

She also noted that we have room to let the economy go well beyond what people think is its maximum level of employment and we can then involve many, many individuals who people have traditionally thought were structurally unemployed, unable to get jobs, she said.

“The long tail of the pandemic will be that we have many, many people who remain on the sidelines unless we take this opportunity to educate these people, get them the training they need.”

So, we will see. The increasingly toxic politics ahead of the election clearly add uncertainty to measures to offset virus impacts, as well as debates on trade and economic policy -- fights that producers should watch closely as they intensify, Washington Insider believes.

Want to keep up with events in Washington and elsewhere throughout the day? See DTN Top Stories, our frequently updated summary of news developments of interest to producers. You can find DTN Top Stories in DTN Ag News, which is on the Main Menu on classic DTN products and on the News and Analysis Menu of DTN's Professional and Producer products. DTN Top Stories is also on the home page and news home page of online.dtn.com. Subscribers of MyDTN.com should check out the US Ag Policy, US Farm Bill and DTN Ag News sections on their News Homepage.

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