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THE BIG DEAL—Powell, Mnuchin split on benefits of easing COVID-19 restrictions: 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.
I have more on their divide and what it means for the path toward recovery here.
A rare split: 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.
- 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.
“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.”
More from Powell and Mnuchin’s hearing:
- Senators press Mnuchin, Powell over scope of coronavirus bailouts
- GOP senator predicts a ‘less than 50 percent chance of passing another bill’
- Warren, Mnuchin spar over Treasury’s $500 billion bailout fund
LEADING THE DAY
Fight emerges over unemployment benefits in next relief bill: A recent boost to unemployment benefits is shaping up to be a major flashpoint in negotiations over the next coronavirus relief package.
For weeks, out-of-work Americans have been eligible to receive an extra $600 a week on top of regular jobless benefits from their state. The extra amount was part of the $2.2 trillion pandemic response bill signed into law by President Trump in late March.
Now, Democrats are eager to extend that benefits bump beyond the end of July, when the program is slated to expire. And they’re drawing battle lines ahead of talks between the White House and Congress on another rescue package. The Hill’s Naomi Jagoda explains here.
- “The virus and its impact on the economy will extend beyond July 31,” Sen. Jack Reed (D-R.I.), who has introduced legislation to extend the benefits, told The Hill on Monday. “You’ll still have people that are in a very difficult situation, and their jobs are not available, they really can’t find alternate employment and they have to support their families.”
- On the other side of the aisle, many Republicans are concerned the enhanced benefits are serving as a disincentive for people to return to work at a time when the economy is struggling to stabilize.
Unemployment to remain above 9 percent into 2021: CBO: Unemployment will average 9.3 percent next year, according to new projections from the Congressional Budget Office (CBO).
- The nonpartisan agency forecast that the unemployment rate would peak at 15.8 percent next quarter and drop to 11.5 percent at year’s end, painting a bleak economic picture.
- Unemployment would eventually dip down to 8.6 percent by the end of 2021, but the average for the year would hold at 9.3 percent.
Despite hopes for a quick rebound, the CBO made clear that the U.S. economy would continue to suffer for much longer than the balance of 2020.
“Compared with their values two years earlier, by the fourth quarter of 2021, real GDP [gross domestic product] is projected to be 1.6 percent lower, the unemployment rate 5.1 percentage points higher, and the employment-to-population ratio 4.8 percentage points lower,” the report said.
GOOD TO KNOW
- An executive order signed by President Trump Tuesday directs agencies to consider what sort of deregulatory action they might take that could spur economic growth.
- Treasury Secretary Steven Mnuchin on Tuesday handed President Trump a debit card with his name on it that resembles the prepaid cards containing coronavirus relief payments that will be sent to millions of Americans.
- Stocks sank on Tuesday as enthusiasm over a potential coronavirus vaccine dampened and major companies reported earnings.
- National Economic Council Chairman Larry Kudlow said Tuesday he does not foresee China selling U.S. debt and that the administration is seeking long-term adjustments to the tax code to alleviate businesses hurt by the coronavirus pandemic.
- Walmart’s online sales increased by 74 percent in the first quarter as shoppers stayed home to prevent the spread of the coronavirus, the company saidTuesday.
- Meanwhile, Pier 1 Imports will end all retail operations, the company announced Tuesday, partially blaming the “impact of COVID-19.”