Infrastructure reform | Biodiesel | Census of Ag | NPPC briefing | Cain hurdles | U.S. debt
— U.S./China trade policy update:
- “We’ve pretty much agreed on an enforcement mechanism. We’ve agreed that both sides will establish enforcement offices that will deal with the ongoing matters,” Treasury Secretary Steven Mnuchin told CNBC. “We are really focused on the execution of the documents.” Mnuchin did not say whether U.S. officials would be based in China as a result of the agreement, but analysts said the new offices would allow both sides to improve communications.
- Mnuchin said a deal with China will be composed of seven chapters and said a chapter to address currency manipulation is “basically complete,” adding, “this is one of the strongest currency agreements we have reached,” he said.
- Reaction to the news that the U.S. and China reached a deal on enforcement came from Senate Finance Chairman Chuck Grassley (R-Iowa). “I feel very good, if that information is accurate,” Grassley said. “There’s only one caveat I’d put on this statement: Mnuchin is making the statement instead of Lighthizer. Mnuchin is a little softer on trade issues with China than Lighthizer is, but they’re a team so maybe they’re on the same page.“
- Something for China, too. The enforcement mechanism and the establishment of the offices have been major hurdles to an accord between the two nations, with China concerned that checks on its policies by U.S. officials would be an infringement of sovereignty. But the agreement will also allow China to monitor U.S. behavior, a reciprocal concession which analysts said showed determination from both sides to reach a trade deal. “This is a reciprocal agreement that can facilitate consultation,” Wang Huiyao, president of the Center for China and Globalization, a non-government think tank in China, told the South China Morning Post. “We will have officials focusing on the implementation of the trade deal,” he said. “China can use the office to monitor whether Chinese companies in the US are being discriminated against – for example, investment deals that are not approved by the Committee on Foreign Investment in the U.S.” China watchers say setting up enforcement offices gives China “face” to say that they are also entitled to monitor the United States.
- No definite timeline. “We are hopeful we can do this quickly, but we are not going to set an arbitrary deadline,” Mnuchin said. “If we can complete this agreement, this will be the most significant changes to the economic relationship between the U.S. and China in really the last 40 years. The opening of the Chinese economy will be a tremendous opportunity with structural changes that will benefit U.S. workers and U.S. companies.”
- Another teleconference today. Mnuchin said he and U.S. Trade Representative Bob Lighthizer would speak with China's chief negotiator, Vice Premier Liu He, again this morning. The two sides have yet to reach a compromise on the conditions under which the U.S. will agree to withdraw tariffs on more than $250 billion worth of Chinese imports.
- Chinese Commerce Ministry spokesman Gao Feng said senior officials from both sides discussed issues that remained to be tackled in the phone call. “Both sides will maintain close communication and work at full speed to continue the negotiations,” he said today.
- China confirms it is looking at request for review of antidumping duties on DDGs. China's Commerce Ministry confirmed to Reuters that the agency is looking at a request by the U.S. Grains Council to review antidumping duties on imports of U.S. distillers' dried grains (DDGs). The news service received the confirmation via fax from the Chinese ministry who said the request was submitted to the agency Feb. 28 and they sought additional information from the U.S. Grains Council which was submitted March 29. "Currently, the commerce ministry is investigating the request and provided it meets our legal requirements, we will decide whether to review the case," said the statement. Should the ministry opt to undertake the review, the statement to the news service said it would be done in an impartial and fair way and a final decision would be made based on that review.
— Pelosi pushes $1 trillion infrastructure measure. House Speaker Nancy Pelosi (D-Calif.) wants at least a $1 trillion investment in a range of infrastructure needs — from roads and bridges, to airports and schools, to broadband and clean water. “This has always been bipartisan until recently. But now hopefully again it will be nonpartisan and it will be at least $1 trillion,” Pelosi told the North America’s Building Trades Union earlier this week at their annual Washington event.
Pelosi spoke with President Trump last week and said that infrastructure is an initiative they “can share,” according to an interview she gave to the Associated Press. Pelosi said she plans to meet with Trump, but didn’t say when. “The president truly wants to have an infrastructure bill,” she said.
Senate Majority Leader Mitch McConnell (R-Ky.) was asked in a Fox News interview yesterday if infrastructure was an area for a potential bipartisan deal. “If we can deal with how to pay for it,” he said. “We’ve all been talking about infrastructure, including the president for a couple of years now. If you want to do a really significant large infrastructure bill, we need to have a lot of straight talk from everybody on both sides about how you’re going to pay for it,” McConnell said in an interview with Bret Baier.
President Donald Trump’s request for $21.4 billion in fiscal 2020 discretionary funding for the Transportation Department would be $5 billion less than the fiscal year 2019 enacted levels and included cuts to funds for Amtrak’s Northeast Corridor that would benefit Gateway.
Infrastructure was on the mind of Democratic presidential candidates — including Sens. Cory Booker (N.J.), Kamala Harris (Calif.), Amy Klobuchar (Minn.), and Elizabeth Warren (Mass.) — as they pitched their campaigns yesterday to Building Trades union members. All of the candidates pitched infrastructure proposals, some calling for $1 trillion for infrastructure while others went as far as calling for $2 trillion in spending.
— National Governor's Association (NGA) outlined infrastructure priorities for Congress and the Trump administration, including critical infrastructure, transportation systems and food supply chains. The group of governors from both political parties detailed four principles to guide a state-federal partnership on infrastructure funding, reform and innovation.
As outlined in the infrastructure principles, governors want Capitol Hill to:
- Create certainty and stability in long-term federal resources to ensure workforce and economic vitality through dedicated funding and financing.
- Fix and expand existing infrastructure and invest in resiliency and security to modernize it for future generations.
- Streamline project delivery, increase transparency, while achieving environmental protection.
- Embrace new practices and technologies that provide innovative solutions to traditional infrastructure needs.
“America’s governors have led on innovative policies to build and fund their states’ infrastructure needs, but the burden of modernizing and maintaining the nation’s infrastructure cannot be left only to states and local government,” said Scott D. Pattison, NGA CEO and executive director. “All levels of government must partner to invest in quality infrastructure and to provide for shared prosperity and quality of life for the current and future generations.”
The governors said Congress must prioritize a 21st century infrastructure package. While states are driving innovation and making hard choices, “the burden of modernizing and maintaining the nation’s entire transportation, water resources and energy networks cannot be left only to the states,” NGA said in a statement.
Facts and figures. Direct federal infrastructure spending in 2016 was less than 0.1% of U.S. GDP, whereas state and local spending neared 1.4%, NGA detailed. “All levels of government must do their share to invest in quality infrastructure and meet our nation’s needs.”
The nation’s governors agree that the country must fix and expand existing infrastructure and invest in resiliency and security to modernize it for future generations. “We must attend to needs across our rural, urban and suburban areas. Infrastructure encompasses more than roads and bridges. It also includes transit, passenger rail, seaports and airports, inland waterways and electric-vehicle charging networks. It involves water and wastewater, the energy system, electricity grids and power plants, public buildings, community development and advanced communications networks.”
The nation’s governors said they will work with Congress and the administration to move a bipartisan infrastructure package this year.
— Grassley wary of auto-tariff report. A U.S. government report that could lead to U.S. tariffs on auto imports is likely not being released by the White House because it lacks rigor and could deal a political setback for Trump, said Sen. Chuck Grassley (R-Iowa). “I’m not sure this 232 study on autos by the Commerce Department was done in a very professional and intellectually honest — well I shouldn’t say intellectually honest — way,” he told reporters.
Bipartisan legislation to curb Trump's trade authority is being overseen in the Senate by Grassley, who pledged to write a bill that could override the president's likely veto over any effort to curb his tariff powers.
Grassley said the U.S.-Mexico-Canada trade deal could break apart if Trump imposes auto tariffs on Mexico and suggested the president tell the other two countries that the tariffs are off. House Speaker Nancy Pelosi (D-Calif.) “has got to move on this, or they’re going to look very, very bad if this thing goes down the drain,” Grassley told reporters at a briefing. Grassley said he would support changes to the U.S.-Mexico-Canada Agreement (USMCA) short of reopening the text of the deal, if it means getting Democrats on board. But he said Democrats need to accept that no trade agreement is perfect. “You’ve gotta get off the perfect. There isn’t such a thing as a perfect trade bill,” Grassley said. “The Democrats ought to … get this through or it’s going to be a tremendous defeat for them, because a lot of this was negotiated by [U.S. Trade Representative Bob] Lighthizer to satisfy Democrats even more than Republicans,” Grassley said. He noted there could be aspects of the deal he does not like, but “overall, this is much better than the old NAFTA.”
— Other items of note:
Trump's taxes. IRS Commissioner Charles Rettig told the Senate Finance Committee on Wednesday that "we anticipate responding" to Ways and Means Chairman Richard Neal's (D-Mass.) letter requesting six years of Trump's tax returns. But he gave no timeline for such a response, despite Wednesday being the deadline Neal gave. Meanwhile, Treasury Secretary Steven Mnuchin said the request raises “serious issues” about whether the committee has a legitimate legislative purpose and how broad congressional investigatory powers are under the Constitution.
Emergency grazing on CRP acres in Iowa. USDA Farm Service Agency (FSA) State Executive Director Amanda De Jong on Wednesday announced that effective immediately, emergency grazing use of Conservation Reserve Program (CRP) acres is approved in Iowa through May 14, 2019. The authorization was granted to address the impacts of the recent extreme weather, including flooding, snowmelt and mud. Participation is limited to livestock producers who lost pasture or fences due to the flooding.
Senate could take the lead in reauthorizing child nutrition programs, Senate Ag Chairman Pat Roberts (R-Kan.) signaled Wednesday. Roberts said a markup is possible in the “not-too-distant future,” but he predicted the legislative effort could face similar obstacles to the 2018 Farm Bill. Roberts said he’s had preliminary discussions with leaders of the House Education and Labor Committee, which has jurisdiction over child nutrition programs in that chamber.
— Markets. The Dow on Wednesday edged up 6.58 points, 0.03%, at 26,157.16. The Nasdaq rose 54.97 points, 0.69%, at 7.964.24. The S&P 500 gained 10.01 points, 0.35%, at 2,888.21.
Wednesday's release of Fed minutes reaffirmed the Federal Reserve's patience regarding future rate hikes.
China's factory-gate inflation picked up for the first time in nine months in March, rising 0.4% from a year ago, amid signs that government efforts to boost the economy may be putting a floor under domestic demand. Consumer inflation also quickened, with the CPI climbing 2.3% from a year ago, adding to optimism that the world’s second-largest economy is starting to turn the corner. Analysts caution it will take a few more months of better data and further policy support from Beijing to see if a recovery can be sustained.
A larger-than-expected drawdown in gasoline inventory pushed American crude up 1.5% to a new five-month high of $64.61 per barrel.
IEA: Hard to put finger on oil prices. "As far as 2019 is concerned, amongst the analyst community there is an extraordinarily wide divergence of view as to how strong growth will be," the IEA said in its monthly report. "We maintain our forecast of 1.4 million barrels per day, but accept that there are mixed signals about the health of the global economy, and differing views about the likely level of oil prices." Factors include surging U.S. crude stockpiles vs. OPEC-led supply cuts, Venezuela and Iran sanctions, and escalating fighting in Libya.
For the first three months of this calendar year, tax receipts were up about 1% from the comparable period in 2018, corresponding with implementation of the tax overhaul, the Treasury reported. Individual income tax revenue was up just under 2%, though the figures don't reflect returns filed in April. The federal deficit through the first half of fiscal 2019 was $691 billion, or about 15% higher than the comparable period in the previous fiscal year, with spending increases making up the bulk of the deficit increase.
The federal government’s current fiscal path is unsustainable, according to a Government Accountability Office (GAO) report on the nation’s fiscal health as of the end of fiscal year 2018. The watchdog agency concluded that at this rate, the federal deficit will reach $1 trillion in the next few years for the first time since 2012, and publicly held debt will surpass its historical high of 106% of GDP within 13 to 20 years, which is sooner than was projected last year. The federal deficit increased from $666 billion in FY 2017 to $779 billion last year, driven chiefly by increases in defense, interest on debt held by the public, Social Security, Medicaid, and disaster relief and flood insurance, according to the GAO. “A broad plan is needed to put the federal government on a sustainable long-term fiscal path,” the report concluded, adding that “the longer action is delayed, the greater and more drastic the changes will have to be.”
EU leaders agree to delay Brexit until Oct. 31. The decision was a compromise, this time between member governments that favored a short extension and those that wanted a much longer one. The new timeline ensures Britain’s participation in upcoming European elections on May 23. It also violates Prime Minister Theresa May's previous vow not to delay Brexit beyond June 30. Donald Tusk, the European Council president, said that the extension should be enough to complete the process if Britain showed “good will.” He told the British: “Please do not waste this time.” Should the House of Commons ratify the agreement to exit before the Halloween deadline, it can leave the EU prior to that date.