Powell urges Congress to unleash ‘great fiscal power’ to defeat coronavirus, repair economy

Federal Reserve Chairman Jerome Powell said Wednesday that now is “not the time” to let otherwise “serious concerns” about the rising national debt limit the federal government’s efforts to cushion the economic blow of the coronavirus pandemic.

During a Wednesday press conference, Powell urged lawmakers to unleash the “great fiscal power” of the U.S. to defeat COVID-19 and repair the economic devastation it has caused across the country.

“The time will come again, and reasonably soon, where we can think about a long-term way to get our fiscal house in order, and we absolutely need to do that,” said Powell, a Republican seen as moderate who urged Congress to cut spending before the pandemic decimated a record stretch of economic growth.

“This is not the time to let that concern — which is a very serious concern — but to let that get in the way of us winning this battle,” he added.

Powell’s call to action comes as some Republican lawmakers grow increasingly weary of further spending and worry about the trillions of dollars added to national debt by the federal government’s fight against the pandemic.

President Trump and Congress have already approved more than $4 trillion to bolster the medical response to COVID-19 and shield the economy from the impact of millions of layoffs and thousands of business closures it has caused. 

The Fed has also slashed interest rates to near-zero, purchased trillions of Treasury and mortgage-backed bonds, and announced it will issue trillions in emergency loans and short-term credit across the economy. 

Congress is expected to approve a fifth coronavirus relief bill sometime before Memorial Day, but some GOP lawmakers, including Senate Majority Leader Mitch McConnell (R-Ky.), have warned about the fiscal implications of increasing the $24 trillion national debt.

“Let’s weigh this very carefully because the future of our country in terms of the amount of debt that we’re adding up is a matter of genuine concern,” McConnell told reporters last week after the Senate passed its latest $484 billion relief bill. 

Despite the worries of McConnell and other fiscal conservatives, Trump and Treasury Secretary Steven Mnuchin have insisted that the U.S. must be willing to spend as much as necessary to limit the economic damage of COVID-19. House Democrats have also insisted on billions of dollars in additional aid to states, hospitals, and direct support to struggling Americans.

Powell said that further fiscal aid could be essential to a successful rebound from the economic downturn caused by the pandemic, warning against the consequences of doing too little, too late.

“This is the time to use the great fiscal power of the United States to do what we can to support the economy and try to get through this with as little damage to the longer-run productive capacity of the economy as possible,” Powell said.

Powell also cautioned that the near-zero interest rates and trillions in emergency Fed loans deployed by the central bank would not likely be enough to repair the toll of the economic crisis, calling for action across “all levels of government.”

“Many borrowers will benefit from our programs as well as the overall economy. But for many others, getting a loan that may be difficult to repay may not be the answer. In these cases, direct fiscal support may be needed,” he said.

Powell has called on Congress to spend freely to fight the pandemic throughout the crisis, urging lawmakers to take advantage of near-zero interest rates to power the U.S. through an unprecedented crisis.

The Fed chairman told House Speaker Nancy Pelosi (D-Calif.) to “think big” on the fiscal response to the pandemic in March, according to a Democratic aide, and has consistently argued for Congress to stimulate the economy and shield vulnerable Americans.

Just more than a month before Powell’s call to Pelosi and the economic collapse that prompted it, the Fed chief urged House lawmakers to cut spending while the economy was strong so there would ample room to respond in a crisis.

“Putting the federal budget on a sustainable path when the economy is strong would help ensure that policymakers have the space to use fiscal policy to assist in stabilizing the economy during a downturn,” Powell said during a Feb. 11 hearing before the House Financial Services Committee.

More than 26 million Americans have filed for unemployment benefits since mid-March, according to the Labor Department, when thousands of businesses shuttered to help slow the spread of COVID-19. 

The U.S. economy shrunk at an annualized rate of 4.8 percent in the first quarter of 2020, according to Commerce Department data released Wednesday, and may contract by as much as 30 to 40 percent between April and June.