WASHINGTON – Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome H. Powell will present a mixed picture of the US economy to Congress Tuesday afternoon as lawmakers prepare for negotiations on another round. of stimulus.
The joint emergence of America’s two leading economic policymakers comes as the coronavirus pandemic resurfaces in many parts of the country, depressing business activity more than many expected and prolonging economic pain. Millions of Americans are still out of work and most of the stimulus checks and small business loan money that were approved in previous bailouts have been distributed. The expanded unemployment benefits, which provided an additional $ 600 per week, expire at the end of the month.
In his prepared remarks, Mnuchin will offer a more optimistic forecast for the economy, saying he expects a rebound in the second half of the year. Powell, while acknowledging that the recovery has started earlier than expected, will continue to share a less optimistic forecast amid continued uncertainty about the virus.
“We are in a strong position to recover because the Trump Administration worked with Congress bipartisan to pass legislation and provide liquidity to workers and markets in record time,” Mnuchin told members of the House Financial Services Committee. .
The Treasury secretary will report better-than-expected May employment and retail sales figures to demonstrate that the economic recovery is underway. But you will also recognize that some sectors, such as retail and travel, will need additional relief from the federal government.
“We will begin to have talks on the supplementary aid legislation,” Mr. Mnuchin will say. “We would anticipate that any further relief would be targeted at certain industries that have been especially affected by the pandemic, with a focus on jobs and putting all American workers who lost their jobs, through no fault of their own, back to work. “
Powell cautions that while consumer spending is recovering strongly and the US economy has entered a recovery phase sooner than expected, a full rebound is unlikely to occur until the pandemic is contained and Americans feel comfortable to resume their normal lives.
“We have entered a new important phase and we have done it earlier than expected,” Powell will say. “While this pickup in economic activity is welcome, it also presents new challenges, in particular the need to keep the virus under control.”
Powell will say the future of the economy is “extraordinarily uncertain” and will depend on controlling the virus.
“A full recovery is unlikely until people are sure that it is safe to re-engage in a wide range of activities,” he will say. “The way forward will also depend on political actions taken at all levels of government to provide aid and support recovery for as long as necessary.”
More than 120,000 Americans died from Covid-19, and cases have increased since states began reopening in stages. Trump administration officials have said they would not call for a total crash of the economy again, but many state and local officials are already delaying some of their reopening plans in an effort to stop the virus.
With millions of Americans out of work and many businesses closed or with lower activity levels, lawmakers have begun to argue whether another round of fiscal support is needed. House Democrats want a $ 3 trillion stimulus package. Republican lawmakers have been discussing legislation that would cost around $ 1 trillion. The White House has been pushing for lower payroll tax, a capital gains tax holiday, and new deductions to encourage spending on food and entertainment.
Mr. Powell and Mr. Mnuchin are expected to face questions about how much more support is needed and what kinds of programs might be best suited for recovery. Lawmakers are also expected to question both leaders about existing programs and whether they are reaching the right corners of the economy.
Mr. Mnuchin has been criticized for being too secretive about how the bailout money is spent and he is expected to take note of recent Treasury moves to provide more information to Congress.
The Fed has been publishing monthly reports on its website, revealing both the amount of use and the names of beneficiaries of programs backed by taxpayer money. It released the first detailed breakdown of its company-specific corporate bond purchases on June 28.
Powell could also face questions about the Fed’s programs, particularly the one aimed at underpinning the corporate debt market. Some lawmakers have questioned why the Fed is buying corporate bonds, while others have expressed concern that the Fed is supporting large companies that do not need federal assistance.
The central bank moved quickly to shore up the markets and the economy as the pandemic blocked the economy in March and April, leaving millions of unemployed and many companies without income. The central bank has cut interest rates to near zero, is buying large amounts of government-backed debt, and has implemented a series of emergency loan programs, many of them backed by funds that Congress had given to the Department of the Treasury specifically to support such efforts. .
The testimony of Mr. Powell and Mr. Mnuchin is intended to focus on those emergency loan programs. Mr. Powell will describe the programs in detail. Several have seen limited acceptance as financial conditions have calmed down and the private market or other government programs have met the demand for credit.
