Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin offered differing opinions Tuesday on how quickly the U.S. economy would recover from the coronavirus recession.
In testimony before a House committee, Powell and Mnuchin offered disparate forecasts for a budding economic recovery despite broadly agreeing on the success of the federal response so far.
Their comments come as Democrats push for another sweeping coronavirus relief bill and Republicans caution against moving forward before existing measures work their way through the system.
Mnuchin told members of the House Financial Services Committee that he expected the economy to “improve significantly” in the second half of the year after adding 2.5 million jobs in May.
“We are in a strong position to recover because the administration worked with Congress on a bipartisan basis,” Mnuchin said, later ceding that further help for certain industries may be necessary.
While Mnuchin asserted that the worst of the pandemic-driven recession is in the rearview mirror, Powell warned of daunting obstacles still ahead after the country suffered “a level of pain that is hard to capture in words.”
“While this bounce-back in economic activity is welcome, it also presents new challenges — notably, the need to keep the virus in check,” Powell said, predicting that a full recovery is “unlikely” until Americans feel comfortable gathering in large numbers and close spaces.
“The path forward will also depend on the policy actions taken at all levels of government to provide relief and support the recovery for as long as needed,” he added, arguing in favor of another round of stimulus.
Powell and Mnuchin’s competing levels of optimism mark one of the few splits between the two most powerful U.S. economic officials amid months of close collaboration. Both have worked in lockstep to deploy trillions of dollars in economic aid that’s widely credited with dampening the staggering blow of the pandemic.
But Mnuchin’s bullish outlook, which is shared widely among President Trump’s top aides, has occasionally contrasted with Powell’s cautious approach as the chief of the independent central bank.
Mnuchin and Powell split during a hearing last month over the benefits of easing restrictions imposed to curb the spread of COVID-19. Those efforts likely helped the economy bring back 2.7 million workers and spur a surge of retail spending, but may have laid the groundwork for June’s surge in cases.
Powell was also blasted by Trump and top White House economic adviser Larry Kudlow after warning of “a long road” to recovery ahead of the U.S. following the Fed’s June policymaking meeting.
Powell has consistently urged Congress to spend as much as necessary to stop the recession from causing long-term damage to the economy.
The Fed chairman has warned that the economy could plunge into a cycle of layoffs and evictions if Congress allows enhanced unemployment benefits to expire at the end of July without some other form of aid to replace it. He’s also urged Congress to consider direct aid to state and local governments who may be forced to cut staff and essential services because of the downturn.
Democrats have echoed Powell’s calls for another stimulus plan as they push Senate Republicans to take up a $3 trillion measure passed by the House in May. Republicans have dismissed the price tag and provisions of the House-passed bill.
In a Monday letter to Senate Majority Leader Mitch McConnell (R-Ky.), Speaker Nancy Pelosi (D-Calif.) and Senate Minority Leader Charles Schumer (D-N.Y.) accused Republicans of being “missing in action.”
“Americans need and deserve bold action now. We have overcome larger problems than the COVID-19 pandemic but not without powerful and effective actions by our government,” they wrote.
McConnell and Senate Republicans have shown dwindling interest in taking up another sprawling spending package after May’s economic gains. While McConnell said in early April that there “will be” another stimulus measure, he said Tuesday that “any further recovery efforts” should focus on health care, helping businesses reopen and bringing students back to school.
“These are the kinds of smart solutions Washington must continue discussing as we evaluate what further steps may be necessary,” he continued.
Formal negotiations over another coronavirus bill are expected to begin when the Senate returns from its two-week July 4 recess on July 20. The size of that measure will likely be affected by the June jobs report set to be released Thursday morning.