Fed's Powell Warns Congress on the Economy

By Yuval Rosenberg

Fed’s Powell: Recovery Has a Long Way to Go, Inflation
Unlikely

Although Federal Reserve Chair Jerome Powell is a Republican and
was appointed by former President Donald Trump, he is proving to be
an important ally for Democrats as they push ahead on another
massive Covid relief and stimulus package.

Appearing before the Senate Banking Committee Tuesday,
Powell told lawmakers that the economy is still suffering from the
effects of the Covid-19 pandemic and continues to need support,
which the Fed for its part will provide through low interest rates
and extensive open market operations — but even as he pushed back
on the notion, suggested by Republicans, that the economy runs the
risk of running too hot, he would not explicitly endorse President
Biden’s $1.9 trillion rescue plan.

"[T]he economic recovery remains uneven and far from complete,
and the path ahead is highly uncertain," Powell said in his

prepared remarks. "Although there has been much
progress in the labor market since the spring, millions of
Americans remain out of work."

Neutral stance on Biden stimulus: Powell told lawmakers
that the Fed does not take a position on fiscal policy, including
President Biden’s proposal to pump another $1.9 trillion into the
economy. Pressed by Republican Sen. John Kennedy (LA) to declare
whether he would be "cool" or "uncool" with the plan passing,
Powell refused to change his stance, saying "I think by being
either cool or uncool, I would have to be expressing an
opinion."

Worry about deficits later: Kennedy asked Powell how the
country "ought to pay all this money back," referring to the
historic deficits the federal government has run as the country
fights the pandemic. "I think that we will need to get back on a
sustainable fiscal path," Powell replied. "The way that has worked
when it is successful is you just get the economy growing faster
than the debt. That’s going to need to happen, but it doesn’t have
to happen now."

Inflation not a concern: The Fed chief said more normal
conditions should start returning later in the year, but he expects
to continue to provide support for the foreseeable future, even if
inflation starts to rise. "The economy is a long way from our
employment and inflation goals, and it is likely to take some time
for substantial further progress to be achieved," he said.

Powell noted that inflation has run below 2% annually on average
for the last 25 years. "Inflation dynamics do change over time, but
they don't change on a dime, so we don't really see how a burst of
fiscal support or spending that doesn't last for many years would
actually change those inflation dynamics," he said.

Powell also
said that the link that may have existed in the past
between deficits and inflation hasn’t been seen lately. He
suggested, too, that rising Treasury yields are a good sign, rather
than a warning to policymakers to slow down. "In a way, it’s a
statement of confidence on the part of the market that we will have
a robust and ultimately complete recovery," he said.

Why it matters: By highlighting the
need for further federal support for the economy and pushing back
against largely Republican concerns about inflation and debt,
Powell is providing significant cover for Democrats as they advance
their $1.9 trillion plan through Congress.

Tweet of the Day: What’s Missing From GOP Relief Plan
Messaging

Republicans have been slamming President Biden’s Covid rescue
plan, arguing that it is more focused on advancing a longstanding
liberal
wishlist than on delivering real pandemic
relief.

GOP criticisms have mostly centered on the package’s $350
billion in aid to state and local governments, which Republicans
decry as a "blue state bailout" that will only encourage more
lockdowns, and on the proposed increase in the federal minimum wage
to $15, which Republicans blast as a job killer. The GOP has also
been pointing out that an estimated $1 trillion of Covid relief
funds previously approved has yet to be spent.

But Sahil Kapur of NBC News
points out one line of attack that’s been relatively
absent from the GOP’s steady drumbeat of criticism:

"A revealing thing about the messaging against the $1.9T
Covid bill is how rarely the words ‘debt’ or ‘deficit’ are
mentioned.

"It was very effective in the Obama era because Dems
conceded the premise. This time the attitude is nah deficits don’t
matter. Result: Voters don’t care."

Editorial of the Day: Defending Neera
Tanden

Republican Sens. Susan Collins (ME), Rob Portman (OH) and Mitt
Romney (UT) have joined Democratic Sen. Joe Manchin (WV) is saying
that they’ll oppose President Biden’s pick to lead the White House
Office of Management and Budget, Neera Tanden. Sen. Lisa Murkowski
(R-AK), who may be Tanden’s best hope of securing the one GOP vote
she’d need for confirmation, reportedly
said she won’t decide until after a committee vote
on Wednesday.

The Washington Post Editorial Board is defending Tanden, calling
objections to Tanden’s "mean tweets" hollow, echoing charges from
some Democrats that there’s an unfair
double standard at play:

"Republican opposition to Ms. Tanden because of her
sometimes-tough tweeting reflects some mind-boggling hypocrisy.
Republicans spent four years playing down and forgiving President
Donald Trump’s disgusting tweets. Not a single Republican
voted against confirming Richard Grenell, Mr.
Trump’s ambassador to Germany, despite his history of Twitter

trolling… .
"Is it unacceptable for the OMB director to be strongly
partisan? Republicans didn’t think so when they
jammed through Mick Mulvaney, a co-founder of the
hard-right House Freedom Caucus, to be Mr. Trump’s first OMB chair,
despite Mr. Mulvaney’s destructive opposition to raising the
national debt limit and avoiding government shutdowns during Barack
Obama’s presidency. When Mr. Mulvaney became Mr. Trump’s chief of
staff, Republicans
approved conservative ideologue Russell Vought to
direct the Trump administration’s budget office. …
"[T]he Senate should approve presidents’ picks to staff their
administrations unless those picks are grossly unqualified. Ms.
Tanden’s long service in Washington, as a top player in Democratic
politics and policy and as the head of a major think tank, makes
her more qualified than was either Mr. Mulvaney or Mr.
Vought."


Read the full piece at The Washington Post.

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