Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell told lawmakers Tuesday that Congress’s early response to the coronavirus pandemic helped support the economy — but that more relief spending will be needed to sustain the recovery.
“Household spending looks to have recovered about three-fourths of its earlier decline, likely owing in part to federal stimulus payments and expanded unemployment benefits,” Powell told a hearing of the House Financial Services Committee. The housing sector has rebounded and business investment shows signs of picking up, he said. He noted, though, that both the job market and overall economic activity remain well shy of their pre-pandemic levels. A faster recovery would require more help from Congress, he said.
“We still have 11 million people out of the 22 million who were laid off in March and April,” Powell said. “There's a lot of work to do there — and you know our policies will support that — but it will go faster for those people if it's all government working together.”
Powell has repeatedly urged Congress to provide more help. “More fiscal support is likely to be needed,” he said last week.
Mnuchin told lawmakers Tuesday that he believes a “targeted” relief package is still needed. “It should be focused on kids and jobs, and areas of the economy that are still hard-hit — particularly areas such as the travel business and restaurants,” he said, according to Roll Call. “I think there's broad bipartisan support for extending the [Paycheck Protection Program] to businesses that had revenue drops for a second check.” The Treasury secretary reportedly also reiterated that the administration supports another round of $1,200 stimulus checks.
Powell and Mnuchin both said that existing Fed and Treasury lending programs can’t take the place of congressional relief money. “I unfortunately think there’s not more we can do,” Mnuchin said.
The public also wants another aid package: Nearly 90% of likely voters say the government needs to pass another coronavirus relief package, according to a Financial Times-Peter G. Peterson Foundation poll released Tuesday. The survey found that 42% now say they are more worried about the economy than public health, a 9-point rise from last month. A plurality of voters, 39%, say Democrats and Republicans are equally responsible for the failure to pass another relief bill so far. Another 26% say the blame lies with Republicans, while 23% say Democrats are to blame.
The poll was of 1,003 likely voters conducted between September 9 and September 14 and has a margin of error of plus or minus 3 percentage points.
What’s next: Well, it’s not another relief package. Despite widespread agreement that Congress needs to do more, these calls for additional stimulus won’t jumpstart stalled talks on another relief package. The odds of a deal before Election Day likely only got smaller with the death of Justice Ruth Bader Ginsburg and the coming fight over her replacement on the Supreme Court.
Meanwhile, Bloomberg economist Andrew Husby projects that the lapse in enhanced unemployment benefits and small business assistance will subtract at least 5 percentage points from fourth-quarter growth and that growth over the coming two quarters will be “little better than stall-speed.”
Goldman Sachs analysts similarly say that the lack of an additional stimulus package would likely lead them to downgrade their growth projections, according to Bloomberg News — but that the outlook could change significantly depending on the presidential election results. “If the 2020 election results in unified Democratic government, this would likely allow a President Biden to pass a large spending increase,” Goldman economists reportedly wrote in a note Monday.
Powell and Mnuchin are set to testify Thursday before the Senate Banking Committee.