Federal Reserve Bank of Chicago President Charles Evans says that a failure of the White House and Congress to approve more coronavirus stimulus funding could reignite “recessionary dynamics” that will hinder the recovery from the recession.
In a Monday speech, Evans said another economic rescue package “will play an enormously powerful role” in helping struggling households and businesses survive until the coronavirus pandemic is under control. He added that sufficient relief, including support for state and local governments, would help unemployment fall from 7.9 percent as of September to 4 percent by 2023.
Without further aid, Evans warned, “recessionary dynamics will gain more traction and lead to a slower trajectory back to maximum employment.”
Evans’s warning is the latest attempt from top Fed officials to nudge the White House and Congress closer to a long-sought deal on a follow-up to the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act that President Trump signed in late March.
Economists credit the CARES Act with shielding the U.S. from some of the economic blow at the onset of the pandemic through expanded and enhanced unemployment benefits, direct payments to U.S. households, emergency loans to small businesses and aid to state and local governments.
But the pace of the recovery has slowed notably as much of that aid expired and washed out of the economy over the summer. The virus has also continued to spread throughout the U.S., surging across much of the South and Sun Belt over the summer and in several northern and Midwestern states through fall.
Speaker Nancy Pelosi (D-Calif.) and Treasury Secretary Steven Mnuchin, the top Democratic and Republican negotiators, have appeared to make progress toward another agreement over the past two weeks. Democrats have lowered their offer for another package to $2.2 trillion and the administration has voiced support for a deal closer to $1.5 trillion.
Trump’s contraction of the coronavirus has also increased the urgency to strike a deal before Election Day.
Senate Republicans, however, have expressed concerns about approving another $1 trillion-plus bill as the national debt reaches record levels.
Senate Majority Leader Mitch McConnell (Ky.) and other top GOP senators have warned that there is little support within the conference for another massive spending bill and prefer a more tailored approach geared toward reopening businesses and schools as quickly as possible despite the state of the pandemic.