Federal Reserve Chairman Jay Powell praised Congress’s early efforts to stem the economic fallout from the coronavirus pandemic in Senate testimony on Tuesday and suggested that more fiscal stimulus would be needed in addition to the central bank’s monetary support.
“We’ve thought about this collective effort — this government-wide effort — as one that involves getting the people and businesses that constitute the economy across the chasm created by the pandemic,” Powell said in front of the Senate Banking Committee. “I think frankly, the fiscal policy, particularly the CARES Act, deserves the lion's share of the credit in creating that bridge so far.”
At another point, he stated: “The risk of overdoing it is less than risk of under-doing it ... fiscal support at this point will really move the economy along to guard against those downside risks."
After months of failed negotiations, talks for another stimulus aid deal have gone nowhere since the election. On Tuesday, a bipartisan group of lawmakers proposed a $908 billion relief package to help break that gridlock.
Treasury Secretary Steven Mnuchin, who testified in front of the committee alongside Powell on Tuesday, also said he supported “targeted, quick relief.” But Powell appeared to be more supportive of the $908 billion offer.
"It sounds like you're hitting a lot of the areas that could definitely benefit from help and some of these are areas that are going to be experiencing a challenging winter," he said.
‘These are not people with a lot of savings’
The stalemate in stimulus negotiations comes as two key unemployment programs are set to lapse on Dec. 26, leaving up to 12 million workers without any jobless benefits unless Congress acts.
Already, out-of-work Americans have faced two fiscal cliffs: one at the end of July when the extra $600 in weekly unemployment benefits expired and then in September when the additional $300 in weekly aid from the Lost Wages Program ran out.
Other government supports and protections are also expiring, including student loan deferrals, small business aid, a national eviction moratorium, and paid family leave.
In his testimony, Powell noted that 10 million people remain out of work, or “more than lost their jobs in the global financial crisis.” Additionally, the job losses have been concentrated on those who earn the least. The unemployment rate for the bottom quartile of earners is 20%, he said, while the national rate is 6.9%.
“These are not people with a lot of savings, a lot of resources, or a lot of opportunities right now,” he said. “So I think there are parts of the economy that will really need help — that might need help — to get that last span of the bridge in place to get to the other side of the pandemic.”