Washington Insider--Monday

By DTN's Washington Insider

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

'Just Label It' Group Urges Food Companies Not to Fund Anti-Labeling Campaigns for GMOs

Advocates of labeling food made with genetically modified organisms (GMOs) have launched a campaign that calls on major food companies to stop funding efforts to block state labeling initiatives. The campaign by the Just Label It (JLI) coalition also calls on consumers to sign a letter urging companies to support mandatory labels on food packaging.

According to the coalition, PepsiCo in 2014 spent a total of $8.8 million in four states to block GMO labeling initiatives. Meanwhile, JLI says polls indicate that 65% to 95% of American consumers support the labeling of food containing GMOs.

Food and chemical companies –– as well as many organizations that represent the U.S. agriculture industry –– have formed the Coalition for Safe and Affordable Food, a trade group that argues that state labeling laws would create a confusing patchwork of regulations. Labeling GMOs also may disparage biotechnology that has been deemed safe by agencies including the Food and Drug Administration and the National Academy of Sciences, according to CSAF.

Several bills have been drafted and introduced during this Congress that would establish a national labeling standard regarding genetically engineered foods. But those proposals are far from passage and the road forward is expected to be challenging for their sponsors.

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States, Municipalities More Interested in Refinancing Previous Debt than Infrastructure Repair

While municipalities have issued a record $130 billion of long-term, fixed-rate bonds this year, an unprecedented 70% of the deals have gone to refinance higher-cost debt, rather than fund capital expenditures, according to Bloomberg and Bank of America Merrill Lynch data. At about $40 billion, municipal bond sales to finance projects are unchanged from the same period last year, even though the nation's aging infrastructure has become a problem.

According to the American Society of Civil Engineers (not exactly a disinterested group), the country requires about $3.6 trillion of investment in infrastructure by 2020. The organization gave the United States a grade of D+ in its latest infrastructure report.

At some point, bonds sales to fund infrastructure will have to increase because the spending won't be seen by states and municipalities as being optional.

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Washington Insider: Ag Policy Revisited

Ag policy has been a battleground for more than seven decades, so it is not surprising that there are still quite a few folks who are unhappy with the current approaches. What is surprising, though, is the persistence of those who would recycle some of the total clunkers that were tested and retested before being abandoned.

For example, it was somewhat startling to see a recent policy blog from a prominent Mid-South land grant university that argued that the current policy framework, grounded on subsidized crop and revenue insurance is worse than the supply and inventory management policies of former years. The new safety net, the writers say, ignores the "problem of market failure that was the reason for the supply control policies in the first place."

The concept of "market failure" has meant different things to different people over the years, but here it seems to simply mean persistent low prices — indexed to some type of costs. However once a "problem" is defined that way, the door is opened to all sorts of remedies to the point that the market-failure tripwire is not widely considered very useful any longer.

That's especially true mainly because prices are such a poor policy tool, since they respond to many factors and certainly serve better as a market dynamic rather than a social objective.

Nevertheless, moving past the idea of prices as social objectives has been difficult. But if there is anything we have learned since World War II, it is that Central Planning with rigid market objectives, including prices, did not make the Communist East prosperous or competitive, and it did not work much better in the West either. Attempts at price management were widely seen as failures in both regions.

In the West, such policies were often slain by politics and political disagreement over just what objectives were appropriate. As a result, U.S. producers suffered frequently as programs priced their crops and livestock out of many markets at home and abroad; often prevented essential production adjustments; frequently generated competitive production where it never had been and probably would not have been; systematically prevented U.S. value-added products from competing in global markets; widely interfered in producer decision making; overcharged consumers and often limited sector growth.

But aside from that …

In discussions regarding U.S. farm policies, it is important to note that policy appearances sometimes deceive. For example, one of the most attractive central planning concepts — the "ever normal granary" — failed regularly because too many political interests saw it in terms of a platform for artificial price objectives and were willing to lock commodities in storage almost forever and send the bill to consumers and/or the government in pursuit of socially determined price targets.

The authors at the Mid-South land grant university argue for policies that correct market failures, but seem not to credit the difficulties and failures of price-focused policies of the past, from "parity" to "supply control" to "income support" and others. Clearly, direct government intervention in either prices or costs has failed spectacularly and repeatedly — and, can be counted on to do the same again if the interventions are the same.

Rather than "market failure," which the writers would avoid, price adjustments typically reflect normal dynamics in either supply or demand. If these shifts are short term, the price moves typically are, too, if appropriate adjustments are allowed. If they are not, and governments intervene, then the policies typically become costly and damaging to overall growth.

So, can central planning (supply control, for example) work better nowadays when producers are even more highly political than they were before? It seems important to recall how widely hated the various set-asides, target prices, multiple loan rates, etc. etc. actually were.

This is not to say that the current programs are perfect. They are getting a lot of criticism for their cost, especially the amount of subsidy in some of the main program's premiums. The writers have a point when they wonder whether the public may be fed up with "the bill for high revenue insurance payments when farmers are making money hand over fist," or when they aren't. But linking that public disdain to the fairly moribund concept of market failure probably will not attract rave notices among either farmers or policy analysts these days.

So, as the new programs focus on subsidized insurance we still need to watch for the cost and structural consequences of the socialization of large shares of risk on structure and growth. It seems fair to note that these likely would be a really tough sell, once again, for the same reasons that made them unpopular in the past, Washington Insider believes.

Editor's note: the column in question comes from Policy Pennings: http://agpolicy.org/…

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(GH/CZ)

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