Peter Friedmann’s View from Washington DC – May, 2020

 

“The Sky’s the Limit”

 

 

Remember the “Great Recession” as the newly elected President Obama termed the economic morass he inherited? Congress jumped in to pump up the economy with what we all thought was a massive cash infusion - $800 billion. The most money the Federal government had ever spent so fast. Many worried that this was too much, too fast, would saddle the country with burdensome debt. The legislation was promoted as an investment in infrastructure. Then, the government agencies charged with pushing this money out so quickly, often demonstrated ineptitude in doing so efficiently and consistent with Congressional intent.  While many were critical, few were surprised; Federal agencies are just not equipped to suddenly spend huge new amounts of money that overwhelm their usual and deliberate annual spending review and selection process.

 

But that was NOTHING compared to what’s going on now. Already Congress (with bipartisan support) and the President have passed and signed off on four COVID-19 pandemic economic rescue bills, that total is 4 times the “Great Recession’s” $800 billion - $3 to $4 trillion. (In fact it is so much that it isn’t even possible to know exactly how much will be spent!) No surprise, considering the precedent of the “Great Recession” spending, that Federal agencies are again having trouble getting all this new money out. It’s not even all out, and the new programs (Payroll Protection, Disaster Relief, Unemployment Add-on’s, etc) implemented, and yet the House passed an additional $3 trillion, which the Senate will consider in coming weeks. However, while the initial 4 COVID stimulus bills had bipartisan support, Senate Republicans are having a hard time swallowing the idea of another $3 trillion.

 

So here is where the media leaves the wrong impression, once again: Media suggests debilitating partisanship here in DC. And the politicians’ statements certainly support that impression. But when it’s no longer just talk and hot air, and they actually turn to legislating, guess what? The Democratic Majority House and the Republican Majority Senate and President Trump all agreed to pass monumental trade legislation, -- the US Mexico Canada Agreement. And they have collectively and quickly passed the largest spending bills in US history -- Republicans, Democrats and the President, all together. 

 

Looking ahead to further spending, while the media trumpets the obvious animosity between President Trump and House Speaker Pelosi, these two do seem to be of the same mind on the largest legislative issue in DC today, one that will impact our lives for years to come – how much to spend now to pump the economy?  So far they seem to agree – the sky’s the limit.

 

Peter Friedmann’s and Ray Bucheger’s View from Washington DC
April 2020

Even with Congress out of session until at least early May and virtually every Congressional staffer hunkering down at home, a tremendous amount of work has been done over the past month to address the health care and economic crisis created by COVID-19. In the span of only three weeks, Congress came together and passed three massive spending bills to expand coronavirus testing capability and federal agency COVID-19 response capacity; enhance family and sick leave, unemployment benefits and other government safety-net programs; and create funding mechanisms to keep American businesses afloat at a time when economic activity has fallen off a cliff. And that is separate from the money that states are making available to individuals and businesses and that the Federal Reserve is pumping into the economy.

While the trillions of dollars that have been made available over the past several weeks have done a lot of good, it is clear that more will be needed. In fact, barely two weeks after being stood up, the Paycheck Protection Program (PPP) – which was created by the recently enacted CARES Act to provide support to small businesses, certain non-profits and certain tribal enterprises to cover payroll expenses, mortgage interest, rent and utilities – has run out of money. This is despite the fact that Congress provided $349 billion for the program, and in spite of implementation problems that have resulted in thousands of small businesses being denied loans.

There is little question that additional money will be provided for the PPP, and there is almost universal agreement in Washington, D.C. that Congress will need to take up and pass another COVID-19 bill in the coming days or weeks. The question is when and how – those questions have exposed disagreement between the two parties with both sides asking good questions and making legitimate points. Broadly speaking, Republicans would like to inject another $251 billion into the PPP now, while Democrats prefer a more expansive approach to address other needs as well. While the stand-off continues, a lot of work is happening at the staff level to develop the next COVID-19 bill, and anything that may come after that, including a comprehensive infrastructure package that would be focused on long-term recovery and could provide billions of dollars for transit, seaports, airports, highways and rail, not to mention water infrastructure, broadband and housing.

Off the Hill, companies large and small argue that eliminating duties (aka tariffs) assessed against imports from China would free up much needed money that companies could use to keep people on payroll and cover other fixed expenses. If the China tariffs were removed retroactively, it would inject hundreds of millions of dollars back into the economy as quickly as U.S. Customs and Border Protection (CBP) could issue refunds. While efforts to remove the China-specific tariffs continue, the effort has more recently focused on simply deferring duty payments for 90 days. Under this proposal, companies would still be required to pay the tariffs – but the deferral would create much needed liquidity in the meantime . Deferral is consistent with other provisions of the CARES Act, which allow for deferral of payroll taxes, student loan payments, etc. The President has the authority to do this without an Act of Congress.

Meanwhile, most polls show a majority of Americans support erring on the side of caution when it comes to re-opening the U.S. economy, and medical experts continue to preach caution; however, there is a real concern about the economic impact of a prolonged shutdown. As a result, many senior Administration officials are pushing for some states to initiate a re-opening of their economies in the coming weeks, and President Trump has issued guidelines for states to follow when ending shelter at home orders. While scores of people were quick to say the President was moving too fast and putting too many people in harm’s way, a close reading of the White House plan shows that it is relatively conservative, requires sufficient testing and hospital capacity to be in place, and was clearly vetted by Dr. Fauci and the White House medical team. This is notwithstanding the fact that numerous states are already developing plans for re-opening, and the decision to re-open will ultimately be made by state and local officials.

A lot has changed in the past five weeks – many of you were still traveling to Washington, D.C. for annual fly-ins in early March! Similarly, a lot could change in the next five weeks. Regardless of what that change looks like, the federal government will be playing an oversized role.

Peter Friedmann’s View From Washington DC

March 2020

 

Washington DC is a ghost town; hotels, restaurants, office buildings, stores closed or empty, no taxis, no ubers; not even food trucks. Coffee shops empty, other than a lonely barista. Construction stopped. One can feel the entire economy of the country shutting down, and wonder how we will get through this, economically.  Congress and the White House are wondering the same.

 

The light is on at the top of the Capitol Dome, meaning that the House and Senate are working. While talking heads on cable are desperately trying to convince us that political disputes are  raging, in fact, Congress and the White House are working together. They are feeling the threat – as this is being written, a second Congressman has tested positive for COVID-19.

 

So time to put disputes aside and get serious.  For instance, Canada’s Prime Minister and President Trump have been personal adversaries, but today the two of them jointly moved to close the US-Canada border. The President has taken a number of Executive actions, which in pre-coronavirus days would have elicited howls of outrage from Capitol Hill; but this month his actions have been accepted: shutting down entry to the US from China, from Europe, from Mexico. Directing military personnel, hospital ships and equipment to civilian purposes. Forcing liquidity into the financial markets.

 

Back on Capitol Hill, where Democrats and Republicans haven’t agreed on much, and impeachment proceedings dominated the news just a few months ago, those differences have been moved aside, at least for now. The Democratic House and the Republican Senate negotiated between themselves and with the White House, agreeing, passing and signing two major coronavirus packages. With a third, much bigger more expensive package coming later this week.

 

Package #1 was focused on testing and federal agency COVID-19 response capacity. Package #2 is focused on family and sick leave, unemployment benefits, propping up government safety-net programs. Now all eyes on negotiations for Package #3, the trillion dollar economic stimulus package. What might be in it?   The House Democratic Majority is developing its proposal, the Senate Republican Majority, its own (but in conjunction with the White House).

 

 Senate Republicans and the White House propose:

  • Payouts to individual Americans: $500 billion.

    • This would be done via two separate checks of equal amounts, one on April 6 and one on May 18.

    • The specific dollar amounts would be means-tested, meaning it would be based on income level and family size.

    • Each round of payments would be identical in amount, per the Treasury.

  • Airline industry bailout: $50 billion.

    • This would take the form of secured loans to passenger and cargo air carriers, with the Treasury to set interest rates and other terms.

    • Limits would be placed on executive pay increases until the loans were repaid.

  • Other affected industries bailout: $150 billion.

    • Secured loans or loan guarantees would be extended to "other critical sectors of the U.S. economy experiencing severe financial distress due to the COVID-19 outbreak."

    • Among the sectors raising their hands for bailouts, largely or wholly for the purpose of paying workers: Hotels, casinos, cruise line operators and shopping mall operators. 

  • Small business interruption loans: $300 billion.

    • Employers with 500 employees or fewer would be eligible, would have to keep paying all their workers for eight weeks from the date of the loan.

    • The government would guarantee 100% of six weeks of payroll, capped at $1,540 per week per employee, with the Treasury to set interest rates and other terms.

 

Democratic Senate proposals (which include concepts expected in the House Democratic Majority Proposal):  To get the votes to get the bill through the Senate, Majority Leader Mitch McConnell (R-KY) will need to include some Democratic priorities, including:

  • Public Health, Medical Supplies, and Treatment Capacity Surge funding

  • Federal funding for the Community Development Block Grant program and disaster relief through the Economic Development Administration’s Economic Adjustment Assistance program

  • Education and child care

  • Amtrak and other public transit

  • Mortgage assistance and rental assistance

  • Unemployment insurance

  • Food stamps

  • Student loan payments

  • Infrastructure Resilience, defined as broadband build-out; distributed, sustainable energy, water infrastructure and public housing.

 

So there you have it – devoid of cable “news” shouting and name-calling; just a list of how Congress and White House are negotiating and collaborating for a coronavirus economic stimulus package they all agree is urgently needed.

 

Not to say there aren’t some emerging covid-19 policy differences. For instance, a bipartisan chorus from Capitol Hill, Republicans and Democrats, is calling on the president to suspend the tariffs on imports from China. Stay tuned.

The View from Washington – February 2020

 

This is a very interesting, but odd time here in DC. The impeachment hearings and trial are ‘old news’; however, while partisan tensions are as high as ever, they have still done some big bipartisan things.

 

On every Congressperson’s mind is ‘decision-day’ (November 3) when voters will not only determine the occupant of the White House for the next 4 or 8 years, but will decide which will be the Majority party in the Senate and House Are Congress and the White House eager to show more accomplishments before November, and if so, what is realistic?  The relationship between the White House and the Speaker of the House is toxic, but that did not prevent them from working together to pass USMCA and avert a budget battle leading to a government shutdown.

 

On both sides of the Capitol, there is disagreement within the Majority parties, as to whether to continue to pursue partisan battles, or to move on to the kind of accomplishments they can brag about as they run for re-election in November. In the House, some Democrats want to continue the investigations of the President and hearings, while other have had enough and want to move on. In the Senate, the same thing: some Republicans wish to investigate the Bidens as well as processes at the FBI which led to the investigations of the President in the first place. But in the wake of the impeachment drama, others have had enough and want to move on. Fortunately, “let’s move on and accomplish something” seems to be prevailing, although the year is young, and attitudes can change on a dime.

 

The common wisdom is that not much gets done in an election year, but that has been disproven by passage of USMCA. More can be accomplished this year.

 

First, the Executive Branch. The President has substantial Executive Authority, and that is where most of the activity will be:  regulatory authority to advance the commercial use of drones, lift restrictions on autonomous vehicles, and in the trade arena, launch trade agreement negotiations with Kenya, Great Britain, expand the recently signed US-Japan and US-China ‘phase one’ deals, adjust or extend retaliatory measures against EU for ‘tech taxes’ or Airbus subsidies. Of course, foreign affairs including military initiatives, remain the province of the President. The targeting of terrorist leaders or the deployment (or withdrawal) of troops left to the President, even though Congress will consider (but not pass) legislation to limit the President’s war powers.

 

Second, Congress. In the Senate, there is a clear top priority of the Republican Leader:  to fill as many vacant federal judge positions as possible – it is being accomplished at record-breaking pace, generally on pure party-line votes. There is no such specific priority in the House. However, it may be possible this year for House and Senate to accomplish something never achieved before: develop a means to fund rebuilding of the nations’ transportation infrastructure that all agree is essential. This may be accomplished by increasing the Federal gas tax for the first time since 1992, or by supplementing the existing gas tax with some other revenue stream capturing electric vehicles (that do not pay any Federal gas tax).

 

Elections will grab the headlines, but legislative achievement and meaningful oversight over federal agencies forward, is still possible this year.

Peter Friedmann’s View from Washington DC: January 2020 

 

Plenty on the nation’s (and the world’s) plate for this year. Some will influence Congressional and Executive Branch legislation, regulation, rulings and policies; some will be decided by the courts; many will find their way into Presidential and Congressional campaign speeches and debates.

 

  • Impeachment –getting revved up

  • Iran – retaliation threats – talk or real? Impact on trade, sanctions, low sulfur fuel availability.

  • Democratic primaries underway -- wide-open field of very different candidates

  • Presidential election campaign - more expensive, louder, more contentious than ever.

  • November 3 – who will be President? Which party will control the Senate?

  • China trade battle – paused for now.  Phase One: tariff relief for many imports and especially exports, but tariffs remain for many more. Is this the ‘new normal’?

  • China – US relations, not just a trade battle: more tenuous than ever:  human rights (Hong Kong and minorities) and military confrontation. Danger ahead. Congress reacting, more sanctions.

  • USMCA – ready for big signing, will Mexico resist enforcement provisions.

  • Japan – 1st Phase agmt, improved access for US exports, but much left out; will there be Phase 2?

  • Europe – on the cusp of a tariff war: over Airbus and Boeing subsidies + French taxes on US tech.

  • Brexit – it may finally happen in 2020. Will US negotiate free trade deal with England?

  • Ocean carrier and terminals’ demurrage and detention charges now a fundamental revenue stream; so onerous the Federal Maritime Commission stepping in – will guidelines change abusive behavior?

  • California law AB5 eliminating independent contracting - trucking, Uber, Lyft, journalists, etc.– stayed by court, will it survive or will Teamsters organize dray and regional truck drivers?

  • Will New Jersey and New York laws limit independent contracting for trucking to/from Port NJ/NY terminals?

  • Ocean carriers’ chassis “box rules” – creating congestion at ocean terminals and rail ramps; will chassis “gray pools” gain footing, or will FMC intervene?

  • Are proposed new inland rail load points the answer for exporters and importers?

  • Will California ports move forward in 2020 with ‘zero emissions’ truck mandate and fees? Will that spread to other ports nationwide?

  • Will the shift of container trade from West Coast to East and Gulf Coasts accelerate?

  • APL into CMA-CGM; OOCL into COSCO; Hamburg Sud into Maersk. Who’s next?

  • Will container ships keep getting bigger, or are they already too big for terminals to handle?

  • How high can the stock market go; how long will the bull run?

  • Will any ‘brick and mortar’ retailers, any shopping malls, survive eCommerce? Will CBP change regulations to bring eCommerce imports into FTZ’s?

  • Customs broker and freight forwarders -- surviving digital platforms, consolidation, and ocean carriers seeking to be ‘one-stop shops’

 

Peter

      

FBB Federal Relations © 2017  | Main photo taken by John Peterson from Peter Friedmann's balcony