Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin warned Tuesday that the economy could suffer long-term damage without further congressional action on the coronavirus pandemic, but differed over how the country and its leaders should tackle that challenge.
During a joint virtual appearance before the Senate Banking Committee, Powell and Mnuchin revealed one of the few differences in their approaches to guiding the world’s largest economy out of the worst downturn since the Great Depression. Their input comes amid an escalating partisan battle over easing restrictions imposed to slow the spread of COVID-19.
Mnuchin argued that with unemployment at 14.7 percent, the U.S. must find ways to swiftly reopen businesses and bring workers back with adequate protections before the economy slips into a spiral of job losses and contraction.
“It is important to realize that the large number represents real people,” Mnuchin told the committee. “This is why it is so important to begin bringing people back to work in a safe way.”
While Powell did not directly dispute Mnuchin’s call to reopen the economy, he said doing so may mean little if Americans aren’t ready for it.
“You can change the formal social distancing measures, but ultimately people are going to decide what they should and shouldn’t do with themselves and with their families. And I think that that will boil down to having pretty good confidence that it’s safe to go out,” Powell continued.
Mnuchin and Powell, both Republicans with a moderate tilt and Wall Street résumés, have shown little daylight in their approaches to the pandemic-driven economic collapse. Both have worked in tandem to support the Fed’s emergency lending efforts to stabilize financial markets and have advocated for spending freely while interest rates are at decade lows.
But the difference in their assessments of how soon the U.S. can begin inching toward normal economic activity highlighted one of the many difficult balancing acts facing the country and its leaders as states move toward reopening.
More than 30 states have begun allowing some businesses to reopen after months of lockdowns. Some have begun easing social distancing restrictions despite no long-term decline in cases, a recommendation laid out in guidelines from the White House and the Centers for Disease Control and Prevention.
President Trump and other GOP leaders have applauded the reopening efforts and warned against the potential harm of waiting too long to make strides toward normalcy.
“The longer that we continue a shutdown, when weeks turn into months, doesn’t that necessarily increase the risk that some businesses will fail, some jobs won’t be there to go back to, if a lockdown and the shutdown continues indefinitely?” asked Sen. Pat Toomey (R-Pa.), a member of the special congressional panel overseeing the Fed and Treasury’s $500 billion economic relief program.
Mnuchin agreed and warned of the potential “permanent damage” the economy could sustain without reopening soon, defending the Trump administration’s response to the pandemic amid intense Democratic criticism.
“How many workers should give their lives to increase the [gross domestic product] or the Dow Jones by 1,000 points?” asked Sen. Sherrod Brown (Ohio), the panel’s ranking Democrat.
“I couldn’t be more proud of the medical advice that we’re getting in the way the economy is opening up in a safe way,” Mnuchin responded. “We have provided enormous amounts of equipment. We’ve worked with the governors. We’ve done a terrific job.”
Democrats have argued that Republicans are risking a surge in new cases with what they see as a premature push to ease restrictions and should instead come back to the table to negotiate more stimulus to support the economy through the pandemic. GOP leaders have called for a pause to assess the impact of the $3 trillion already spent but acknowledged that another package will likely be necessary.
Powell has consistently argued that the staggering toll of the pandemic required ample financial support from Congress and the Fed. In a series of speeches and media appearances, the central bank’s chief has warned fellow debt-minded Republicans about the danger of not acting quickly or boldly enough in the face of an economic crisis.
“What Congress has done to date has been remarkably timely and forceful. I think we could say the same about what we’ve done. I do think we need to take a step back and ask, ‘Over time, is it enough?” Powell said Tuesday. “We need to be prepared to act further.”
Powell offered few comments about the Trump administration’s response to the virus beyond praising the quick approval of a titanic $2.2 trillion relief bill and urging full support for COVID-19 treatment and vaccine development.
And while he advocated for a “sensible, thoughtful reopening of the country,” Powell also warned that some parts of the economy may not recover until the threat of the pandemic passes.
“The number one thing, of course, is people believing that it’s safe to go back to work,” Powell said. “It will be a combination of getting the virus under control, development of therapeutics, development of a vaccine, all of those things.”
“I just think that process will take time,” he added.