Wiesemeyer: COVID-19, Close Election Determine Policy Outlook
The availability and effectiveness of a vaccine for COVID-19 will be the single biggest factor driving any economic recovery in the coming months.
That was the opening message of Washington observer, veteran consultant and policy analyst with Pro Farmer Jim Wiesemeyer, who gave the keynote address at the Waterways Symposium, held remotely this year November 12. Wiesemeyer delivered his usual shrewd, fast-paced and penetrating snapshot of politics and the outlook for infrastructure and the economy in the wake of the recently concluded elections.
The elections delivered a mixed message that shocked pollsters who once again drastically underestimated the amount of support for Donald Trump, as they did in 2016, Wiesemeyer said. Trump appears to have narrowly lost to former Vice President Joe Biden in a closely contested and still-litigated election, with the highest overall voter turnout since 1876. Biden received the most votes ever given to a presidential candidate, about 75.7 million; but Trump got the next-highest-ever number of votes, at least 71 million. By contrast, Barack Obama received the previous highest number of votes, 69.5 million. The swing states this year were Arizona, Georgia, Michigan, Pennsylvania and Wisconsin. Texas may be s swing state soon but isn’t yet, he said.
However, Trump’s coattails won, Wiesemeyer said. The Republicans picked up at least eight seats in the House and won three more state legislatures. The GOP now controls 27 governorships to the Democrats’ 22. The closeness of the elections, and especially the Republican gains in the House—unusual in a year in which the party’s presidential candidate lost—means that Speaker of the House Nancy Pelosi will have to “corral” her left wing to keep the GOP from possibly flipping the House in the next election cycle in 2022, Wiesemeyer said.
The Democratic majority in the House is now so narrow that Pelosi has reportedly warned her party colleagues against accepting positions in the Biden administration. Possibly balancing that, many more Republican than Democratic senators will be defending their seats in 2022.
Control of the Senate, and thus the ability of Biden to pass his agenda in Congress, is still up in the air because two Senate races in Georgia were so close as to compel two runoff elections in December. If the Democrats win both, they will have 50 Senate seats to the Republicans’ 50, with incoming Vice President Kamala Harris able to cast the tie-breaking vote. Even if the Democrats win Senate control, though, maverick Democrat Sen. Joe Manchin of West Virginia has already indicated he will vote against some progressive Democratic wish-list items, including ending the filibuster and expanding the Supreme Court.
If Democrats don’t win Senate control, Biden will have to turn to executive orders to implement much of his agenda, as Trump and Obama did before him. The big priorities for Biden will be infrastructure, climate change and health care, with farm, trade and food policy issues not far behind. Wiesemeyer sees few dramatic changes in farm policy, which, like infrastructure, has usually been an arena for bipartisan cooperation. He believes there is at least a 60 percent chance of the next Congress passing an infrastructure bill under Biden. “The Obama administration studied infrastructure, and so did Trump,” he pointed out, so both parties are ready for action.
“Biden likes to go bold,” said Wiesemeyer, “but will Congress provide the funding for his agenda?” It’s possible Biden would like to appoint a “climate czar,” but such a position needs congressional approval. Congressional action would also be needed to give authority to the Commodity Credit Corporation to regulate carbon markets, another idea that has been discussed recently.
Recovery And Vaccine
Both Pelosi and Senate Majority Leader Mitch McConnell have said they want to pass an omnibus funding bill by December to avoid another government shutdown. A third COVID-19 stimulus bill could happen either by the end of this year or early next year, Wiesemeyer said. He predicted it will be at a lower level of aid than previous stimulus bills.
The gross domestic product plunged by 3.7 percent in 2020 due to the lockdowns, he said, but is expected to climb up by at least 4 percent in 2021 if and when a vaccine becomes available. At this writing, initial reports from two pharmaceutical companies have been encouraging, with both Pfizer and Moderna reporting a more than 90 percent effectiveness for their vaccine candidates. They could be available sometime within the next few months.
On infrastructure, Wiesemeyer predicted that the “newly discovered financial scruples” of the Republicans will kick in when it comes to spending on Democratic infrastructure plans, assuming the GOP controls the Senate. The Democrats usually demand higher spending caps as their condition for agreeing to an omnibus bill and avoiding a government shutdown.
Trade And Resurgent China
On trade policy, Weisemeyer predicted that Biden would call for a study to put off hard decisions for a few months, and also to wait for a vaccine, which will boost trade by itself when it is distributed as pent-up demand is unlocked. China’s demand, in particular, is increasing as its economy bounces back and it revamps and rebuilds its hog industry on modern lines after the devastation of swine flu. In particular, it is switching more hog feed from swill to coarse grains. “China’s corn imports will be huge for all corn producers,” he said.
It’s unclear whether China’s recent big buys of corn and soybeans, including from the U.S., are part of its fulfillment of its Phase 1 trade agreement commitments or related to this internal demand. Some reports indicate China wants to renegotiate the Phase 1 agreement, Wiesemeyer said.
On soybean tariffs, Wiesemeyer noted that China can suspend them whenever it believes it is in its interest. “China will import what they need to from producers,” he said. But they’ll keep tariffs on the books for leverage. He thinks the tariff issue between the U.S. and China will eventually be resolved, but not in the short term.
Biden has said he wants the U.S. to rejoin the Trans-Pacific Partnership and reform the World Trade Organization, which Trump sidelined and threatened to leave. But it takes time to do these things, he said.
Besides infrastructure, trade and health care, the Renewable Fuel Standard, also known as the ethanol mandate, will be an issue in the next Congress. Wiesemeyer, a long-time ag journalist, said he believes “corn-based ethanol has peaked,” and the next substantial revenue stream for farmers will come from carbon credits. Biden has planned to have 550,000 charging stations for electric cars installed nationwide.
Certain sectors, like the leisure and travel industries and restaurants, have taken big hits from the pandemic, and the country could see a record number of small business bankruptcies, Wiesemeyer said. States have also been severely strained by the pandemic, with state governments facing a collective budget shortfall of $454 billion through 2022. Unforeseen unemployment claims due to the pandemic have forced states to borrow from the Treasury Department.