Impact of Elections on Ag Policy

Posted on 10/29/2020 12:26 PM

Senate control seen as key

 


 

While who wins the White House is the most important, what the president can do will largely be dictated by which party controls the chambers in Congress, especially the Senate.

 

If Democratic presidential candidate Joe Biden wins the White House and his party retains control of the House and regains control of the Senate, substantial changes would likely occur during the first two years of any Biden administration. Biden has signaled three major issues his first two years: climate change, health care and infrastructure. The ag sector would have impacts from all three of those topics, including (1) Pushing for a new revenue stream via carbon credits, (2) getting better health care at a more affordable cost for rural America, and (3) improving the rural infrastructure that not only would make intra-state movement of farm products more efficient, but would eventually fund needed improvements in waterways and ports, so important for U.S. ag exports. Some of the Democratic changes could come via budget reconciliation, where a simple majority is needed for Senate passage.

 

On the flip side of this, eliminating CO2 emissions could result in regulations that are costly for producers to meet while driving up costs for an energy-intensive sector. Moreover, while the Affordable Care Act (ACA) was supposed to expand access to affordable health care coverage, many self-employed, including producers, struggled under ACA. And, how rural America is treated under an infrastructure bill written primarily by urban Democrats is a question mark, some note. A big question under this scenario is whether enough Democratic senators would agree to eliminate the filibuster so Democrats could govern by simple majority votes in each chamber. If this were to occur, there could be seismic shifts in politics and government as we have come to know them.

 

If Biden wins the White House and Democrats retain control of the House but do not regain control of the Senate, then Biden's major initiatives would face hurdles. He would likely use regulations (or re-regulation) and executive orders to carry out some of his major initiatives, much like former President Barack Obama and current President Donald Trump has done.

 

Should Democrats win control of the Senate, the focus will be on whether party Senate leaders will do away with the 60-vote filibuster, pack the Supreme Court and/or push for statehood for Washington D.C. and Puerto Rico. Most think Democrats would want to see if Republicans would be a major hurdle in the Senate. If so, that would give them cover to abolish the filibuster. Any statehood moves for the two locations mentioned would provide the Democratic Party with at least three and possibly four more senators. How many senators the Democrats have in the next Congress is important because if the final tally is 50-50 (where the vice president breaks ties) or 51-49, some Democratic senators may not want to go along with the more aggressive changes Biden and top Democratic Senate leaders may want, including ending the filibuster and packing the Supreme Court. That would bolster the power of more moderate Democratic senators in next year’s Congress should Democrats win that chamber.

 

Should Trump retain control of the White House, his initiatives would likely be similar to those of his first four years — deregulation, a push to further lower taxes, and an aggressive trade policy, taking on China and other countries where he and his trade policy team think are using unfair trade practices. Trump would continue to focus on bilateral trade agreements. Much of his agenda would be achieved thru executive orders and other actions he can take unilaterally, including placement of originalists and textualists on the federal courts. Supreme Court Justice Breyer is 82.

 

A Biden administration would likely show a more cautious approach to trade policy his first year or perhaps two in office. He would also be aggressive on China, as was Trump, but a Biden trade team would seek more support from allies regarding pressuring China to become more open in its trade policy. Biden has said he favors a multilateral approach to new trade agreements and that he wants to join the Trans-Pacific Partnership (TPP, now called CPTPP), but this would likely take some time and require CPTPP members to “give” Biden a few things they may find unpalatable. Biden's trade policy would likely focus more on labor and environmental issues than the Trump approach. (Note that the authorization for Trade Promotion Authority (TPA or fast track) for new trade agreements expires in July of 2021. Of note, Biden says he wants to link trade policy with how countries deal with climate change promises. Democrats have been unified by their desire to oust President Trump. But if that happens, deep divisions on the issue of trade are likely to reappear, according to a New York Times article (link). Biden would not likely tear up the Phase 1 agreement with China, but if he did, he would be jettisoning some major trade benefits with China that U.S. agriculture has gained via that deal. But Chad Bown, a senior fellow at the Peterson Institute for International Economics, says “(President) Trump’s trade war has failed to address what really ails the U.S./China trade relationship. It is time for a new approach.” “One of the reasons we got to where we were with Trump is that we exhausted the other options,” said Wendy Cutler, a former U.S. trade negotiator. She called the results of Trump’s approach “modest.”

 

Another trade-related topic will be implementation of the USMCA. If Democrats control the White House, House and Senate, look for a very close focus on how Mexico is following through with labor and environmental language relative to the agreement, and on Canada’s follow through on dairy policy issues.  

 

Big differences in approach to tax policy. While a Trump second term would seek to further lower taxes, with a likely focus on middle-class taxpayers rather than corporations, Biden has made clear he wants to increase taxes for individuals making more than $400,000 annually. He would also attempt to boost taxes for corporations and a big boost in the capital gains tax. All of this would impact some in the ag sector. Another potential big change would be what Biden wants to do relative to estate taxes. He wants lower exemptions and has signaled a change in estate tax basis more along the lines of capital gains taxes.

 

Regarding farm policy, any Trump second administration would again find the White House a major player, especially if additional aid payments are needed. As for any Biden administrations, he would likely depend more on his Cabinet. For agriculture, a lot will depend on the House race in Minnesota's 7th congressional district, where current House Ag Chairman Collin Peterson (D-Minn.) is in a very close race against well-known and well-funded GOP challenger Michelle Fischbach. Should Peterson lose and the Democrats retain control of the House, there will backroom conversations on this replacement to head the Ag panel. While David Scott (D-Ga.) is seen as next in seniority (assuming Rep. Bennie Thompson of Mississippi wants to retain his position on the Homeland Security panel, next in line is Rep. Jim Costa (D-Calif.), followed by Marcia Fudge (D-Ohio). The Congressional Black Caucus is reportedly pushing Fudge for the Agriculture panel slot. If she is chosen, she would be the first female House Ag Chair, and the first Black. Any Fudge leadership would be a major change for the panel as she would very likely focus on nutrition and food safety issues. However, House and Senate Democrats have almost always sided with seniority over other considerations when choosing who leads a committee, with a notable exception of Henry Waxman (D-Calif.) over John Dingell (D-Mich.) at Energy & Commerce.

 

The Senate Ag Committee would be led by either Sen. John Boozman (R-Ark.) if the Republicans retain control of the Senate, or Sen. Debbie Stabenow (D-Mich.) if the Democrats garner control of the chamber. Stabenow is a known commodity as she has led the Ag panel before. Boozman is a consensus builder and says he wants to start debate on the next farm bill in 2021, but he is not interested in rewriting the farm bill early since it is a five-year contract. History shows cotton policy has been a more challenged situation under Stabenow when she led the Senate Ag panel.

 

As for overall farm policy, history shows the Republicans prefer a market-oriented approach, focusing on production agriculture, but some key Democrats led by Stabenow have been focusing increasingly on urban agriculture, roof top gardening, and the like… that is where a lot of the money went in the 2018 Farm Bill, preventing any big boost in the safety net for traditional agriculture. Efforts to lower payment limitations for farm program payouts are always a possibility. Democrats usually focus on the small- to medium-sized producer. That usually means at least an attempt by some in the party to lower payment limitations for farm program payouts. Crop insurance has bipartisan support, so no major changes would be likely for this program, at least for the next few years. However, the crop insurance program could face some pressure whenever Washington begins focusing on the $21 trillion debt and eventual efforts to lower annual deficits and overall debt.

 

Another issue if Democrats win a trifecta (White House, House and Senate) is meat industry issues. Some Democrats would likely again push for mandatory country-of-origin labeling (COOL), but if the GOP keeps Senate control, the hurdles would likely be too high for that to occur. Besides, the World Trade Organization (WTO) ruling makes the bar pretty high with the retaliation threat still there. Meanwhile, no matter who wins the levers of Washington following Nov. 3 elections, the consensus in Washington is that the meat sector will be a focus on several fronts, including price transparency, alleged antitrust issues, and how meat packers dealt with Covid-19.

 

Dairy policy may not see many changes in the next few years because in the 2018 Farm Bill, Rep. Peterson gave dairy producers a lot of what they were seeking relative to a far more effective dairy program safety net. That could be tweaked some in the next farm bill, making it an even better safety net.

 

Energy policy will also be in play during the next two years. The Democratic push relative to climate change and the push by some in the ag sector to qualify for carbon credit payments as another program revenue stream were previously mentioned. But climate change isn’t just carbon credits, it is incentivizing farmers to capture carbon and reduce methane emissions which can then generate credits in private markets. Another major issue will be the Renewable Fuel Standard (RFS) because its authorization ends in 2022. That means the RFS will be a topic of debate in 2021, no matter who wins the White House and controls Congress. But the future of the RFS is dependent in part on the next president, Congress and who is the next EPA administration. Also, some reports note a Biden administration may have an “Energy Czar” or something similar and if so, the portfolio of that possible position would be important to monitor. The Democrats’ race to eliminate CO2 emissions is resulting in decisions like that of California to eliminate gasoline-powered vehicle sales. If that occurs and 11 states follow suit, one industry source said, “it would make small refinery exemptions look like a walk in the park for biofuels.” Another industry analyst adds, “The next two years are potentially the most consequential for biofuels because of the emphasis on climate and electronic vehicles (EV’s). An electric fuel future has surpassed biofuels as the most fantastic, fascinating and freshly popular energy topic. Traditional ethanol and biodiesel are now considered legacy, old and been-there, done-that. Combined with unsettled volumes for this year and an uncertain future over the next two, we are entering a very consequential period for the future of biofuels as we know them.”

 

A major topic that will impact all sorts of policy ahead is the U.S. and world economy. That will primarily be how the Covid-19 situation is dealt with, and if and when pharmaceuticals and vaccines become available. That in turn will also drive the world economy, so important to the future of U.S. farm product exports. Will Biden put more restrictions in place to battle the Covid pandemic? That could be a key as candidate Biden has talked of adding millions of jobs. Putting restrictions on business activity in place would work against adding millions of new jobs. Current restrictions deployed in the U.S. have focused on efforts at the state and local levels as opposed to federal mandates. If the latter takes place, that will up the needs for additional fiscal support for the U.S. economy and likely the ag sector and lengthen even further the recovery from the pandemic.

 


 

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