Washington Insider-- Friday

Growing Fiscal and Monetary Fights

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

USTR's Doud Upbeat About Phase One Trade Deal Progress

US Chief Ag Negotiator Gregg Doud briefed state ag officials on the latest ag trade policy developments at the National Association of State Departments of Agriculture (NASDA) meeting this week.

Topics included a new enforcement mechanism for Canadian dairy commitments relative to the USMCA, China's progress towards meeting its commitments under the Phase One trade deal and work towards a new free trade agreement with the UK.

On China, Doud reported “great progress in terms of the procedural aspects of [the Phase One] agreement and China's compliance with something like 50 of 56 or 58 procedural requirements,” according to Washington State Agriculture Director Derek Sandison. He said Doud also pointed to an increase in the pace of China's US ag commodity purchases, especially relative to corn and soybeans.


FMCSA Proposes Pilot Program to Allow Pause in Hours of Service (HOS)

The Federal Motor Carrier Safety Administration (FMCSA) is proposing a pilot program to allow temporary regulatory relief from hours-of-service (HOS) requirement that all driving by drivers has to be completed within 14 hours of them starting duty.

The Split Duty Period Pilot Program would allow participating drives to pause their 14-hour on-duty period with one off-duty period of at least 30 minutes but no more than 3 hours. The plan would be limited to a those holding a commercial driver's license that meets specified criteria.

“This pilot program seeks to gather statistically reliable evidence whether decisions concerning the timing of such flexibility can be aligned with employers', shippers', and receivers' scheduling preferences to optimize productivity while ensuring safety performance at a level equivalent to or greater than what would be achieved absent the regulatory relief,” FMCSA said in a notice in Thursday's (September 3) Federal Register. There would be criteria for both motor carriers and drivers to be able to participate, including the carriers cannot have any enforcement actions within the past three years and cannot have a crash rate above the national average.

For drivers, they cannot have had their license suspended, revoked or cancelled and cannot have had a conviction for a violation of state or local motor vehicle traffic control laws in connection with an at-fault crash. The pilot program could last up to three years. There will be a 60-day comment period on the plan.


Washington Insider: Growing Fiscal and Monetary Fights

Every day now, it seems there are new examples of the increasing political toxicity in Washington and a good bit of that angst concerns the Fed, even as a nominee for the Board of Governors continues to draw strong pushback. And, enduring concerns about debt levels increasingly shadow efforts to offset the impacts of the coronavirus.

This week, Bloomberg is reporting that a group of more than 100 prominent economists--including seven Nobel Prize laureates--signed a new open letter to U.S. senators urging them to reject President Donald Trump's nomination of Judy Shelton to the Federal Reserve's Board of Governors.

The new letter is nearly identical to one published in August by former Federal Reserve officials and staffers, a letter that now has 70 signatories, including four former regional Fed presidents and a former Fed governor.

Those writers argue that Shelton's views on monetary policy and economics are “so extreme and ill-considered as to be an unnecessary distraction” from the tasks facing the US central bank as it deals with fallout from the coronavirus pandemic.

The new letter's signatories include seven winners of the Nobel Memorial Prize in Economic Sciences, Bloomberg says. Shelton's nomination was voted out of committee on a party-line vote in July and she now awaits approval by the full Senate--but no vote has yet been scheduled for her or fellow nominee Christopher Waller, research director at the St. Louis Fed.

Shelton, an informal adviser to the President's 2016 campaign, has drawn significant criticism for policy views many consider well outside the mainstream--including a history of admiration for the gold standard--and for being a political loyalist who might bend to Trump's will.

Still, she appeared to abandon her advocacy for ultra-tight monetary policy when she emerged as a Fed candidate, publicly aligning herself with the President's calls for lower interest rates—and now insists that “no one will tell her what to do.”

In the meantime, The Hill reported this week that negotiations for additional virus relief continue amid reports from the nonpartisan Congressional Budget Office that emphasize an increasingly gloomy outlook for large deficits. For example, CBO says the deficit for fiscal 2020 will more than double the previous high--$1.4 trillion in 2009 during the height of the Great Recession. Overall, the debt is on track to surpass 100% of GDP next year and break its World War II record by 2023, CBO says.

Republican leaders say they aren't firmly opposed to another relief measure, but they're harshly critical of the one put forth by Speaker Nancy Pelosi, D-Calif., so the Senate leadership is working to advance a “skinny” $500 billion relief bill. A vote on that measure could come as early as next week, posing a test for what level of support Senate Republicans can muster in their own party for a bill that's less than half their initial offer.

Those efforts are separate from stalled negotiations between Pelosi and Senate Minority Leader Charles Schumer, D-N.Y., on one side and Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows on the other. Meadows, in particular, has put the fiscal issue front and center. As a congressman and cofounder of the conservative Freedom Caucus, Meadows frequently railed against bipartisan spending deals because of the hit to the deficit.

Mnuchin, meanwhile, is striking a slightly more optimistic tone, saying in congressional testimony Tuesday that President Trump agreed that some level of fiscal aid was still necessary. “Let me say I very much agree with you and those other experts that more fiscal response is needed. The president and I want to move forward with more fiscal response,” he said.

While Democrats have come down from $3.4 trillion to $2.2 trillion and Republicans have come up to $1.3 trillion, they remain bitterly divided over hundreds of billions of dollars in proposed aid to state and local government.

Fiscal experts, including Federal Reserve Chairman Jerome Powell, say bold stimulus measures are needed to help the country dig its way out of the deepest economic downturn since the Great Depression, and several longtime advocates for fiscal restraint argue that even with the new CBO report, debt concerns should not stand in the way of a strong response to the pandemic.

“The warning bells this report contains should not cause a premature end to borrowing, but a commitment to dealing with the debt at the appropriate time,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

Shai Akabas, director of economic policy at the Bipartisan Policy Center, added that borrowing now could help lead to a stronger recovery and ultimately put the country in a better position to address the debt. “The strange reality is that for the nation's long-term budget picture to get better, it must get even worse in the short term,” he said.

“Doing so will give our economy the best shot to bounce back, and a good recovery now will help lessen budget shortfalls in coming years.”

So, we will see. The fight to control the virus continues to be central for most policy makers, even as the struggle to stimulate the economic recovery gains in importance—and the pre-election maneuvering on the pandemic and the economy overshadows virtually all other policy debates nationwide, fights producers should watch closely as they intensify, Washington Insider believes.


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