Federal Reserve Chair Jerome Powell on Tuesday warned Congress against being too cautious in providing more relief to the economy, saying the country has suffered during past recessions because policymakers failed to do enough.
Powell, speaking at a Senate Banking Committee hearing alongside Treasury Secretary Steven Mnuchin, said the danger that the economy won’t get enough aid is much bigger than that it will get too much.
“The risk of overdoing it is less than the risk of underdoing it,” he said. “People are always worried about doing too much, and you look back in hindsight and say, ‘Well, we didn’t do too much. We might’ve done a little more and a little sooner.’”
Former Fed Chair Janet Yellen echoed Powell’s remarks when she was formally introduced today by President-elect Joe Biden as his choice for Treasury secretary. Said Yellen: “Lost lives, lost jobs, small businesses struggling to stay alive are closed for good. So many people struggling to put food on the table and pay bills and rent. It’s an American tragedy. And it is essential we move with urgency. Inaction will produce a self-reinforcing downturn causing yet more devastation.”
Those comments came as a bipartisan group of lawmakers aimed to resuscitate talks on another aid package, proposing a $908 billion measure to rescue small businesses, the unemployed and other sectors that are being hammered the most by the coronavirus crisis.
Politicians on both sides of the aisle have underlined the need for more aid, but talks have gone nowhere for months.
Mnuchin took heat from some Democratic lawmakers over his decision last month to terminate several Fed emergency lending programs at the end of the year, saying they were no longer needed. Sen. Sherrod Brown of Ohio, the top-ranking Democrat on the panel, said the Treasury chief was either “purposefully trying to stop President-elect Biden and Janet Yellen from getting to work for the people we all serve, or you’re so delusional that you think because the stock market is back up, everything is fine.”
Mnuchin told lawmakers he was only adhering to the requirements of the CARES Act, the massive aid package approved by Congress in March that included funding for the Fed programs.
The Fed issued a statement protesting Mnuchin’s move after it was announced, but at today’s hearing Powell said it was within the Treasury secretary’s rights to do so.
For his part, Mnuchin reiterated his desire for a relief package that’s targeted toward helping the hardest-hit parts of the economy.
“Things like [government-backed small business loans] and unemployment that are running out are high on the list,” he said.
He also told lawmakers that he would speak with House Speaker Nancy Pelosi this afternoon, their first conversation since Oct. 26. In a statement after they spoke, Pelosi said Mnuchin had told her he’d be reviewing both a proposal from her and Senate Minority Leader Chuck Schumer made last night, as well as the bipartisan plan put forward today.
“Additional COVID relief is long overdue and must be passed in this lame duck session,” Pelosi said.
Senate Majority Leader Mitch McConnell (R-Ky.), meanwhile, told GOP senators on Tuesday that he would be reviving and altering his targeted relief package for a vote.
Several key issues remain unsettled, with Democrats continuing to press for support for states and Republicans seeking to include liability protections for businesses, so they can’t be sued by employees over Covid-19 issues after returning to work.
In response to questions from Sen. John Kennedy (R-La.), Powell suggested that lawmakers consider some funding for state and local governments, noting they’re one of the largest employers in the country.
“States provide critical services,” he said. “I think at least some of them had significant hits to revenue. I think they’ve laid off more than a million people. … So I think it’s an area where it’s worth looking.”
San Francisco Fed President Mary Daly in an interview also warned that the economy would be in worse shape without more government action.
“If we don’t get the direct fiscal support, we will recover over a longer period,” she said. “That’s a price I don’t want to pay.”