A top Federal Reserve official said Wednesday that the U.S. inability to control the coronavirus pandemic has limited the benefit of trillions in fiscal stimulus approved by President TrumpDonald John TrumpDemocrat calls on White House to take back ambassador to Belarus nominated TikTok to collect data from mobile devices to track Android users: Peterson report wins Minnesota House primarily in crucial swing district MORE and Congress earlier this year.
Eric Rosengren, president of the Federal Reserve Bank of Boston, said in a Wednesday interview with The Hill that the abrupt peel-back of restrictions imposed to bear the pandemic in the U.S. prevented record-breaking economic rescue efforts encourage a rapid recovery time.
“Normally with the kind of stimulus we’ve seen with both fiscal and monetary policy, you’d actually expect a V-shaped recovery,” Rosengren said, referring to an immediate economic recovery from a decline of similar speed and scale.
“The reason we do not see a V-shaped recovery and that we are currently seeing a break is that it is very difficult for fiscal or monetary policy to compensate for public health care,” he continued.
Rosengren is the latest in a series of top Fed officials – including Fed Chairman Jerome Powell – to stress the importance of vigorous measures to control coronavirus following a full recovery from the pandemic-driven recession.
The onset of the pandemic caused the fastest and deepest economic collapse in American history. While unemployment has since fallen from a post-Great Depression high of 14.7 percent in April to 10.2 percent in July, the second wave of cases of coronavirus drastically reduced the rate of recovery that began in May.
In a speech Wednesday morning, Rosengren said the rapid release of pandemic-related restrictions across much of the U.S. in May and June underscored the success of previous lockdowns and trillions in fiscal and monetary relief. He argued that although rapid opening helped an increase in consumer activity, the lack of precautionary measures taken after it helped spread the virus widely and delayed a complete rebound from the first wave of the pandemic.
“By looking at Europe and China, and many parts of Asia that have the virus under better control, you can see that their economies are able to recover,” Rosengren told The Hill.
“If we continue in a way where we do not get the pandemic under control, it will still be a long time before you will feel comfortable going to a restaurant or a movie,” he said.
Rosengren’s remarks come as the White House and congressional leaders try to spark failed negotiations over another round of stimulus and economic relief. Republicans and Democrats failed to reach a deal before the expiration of improved unemployment benefits, federal protections against eviction and redundancy and the application deadline for forgivable loans to small businesses.
While President Trump signed several executive orders over the weekend to curb the economic damage, experts say they may not be legal or effective. Republicans have also brustled at spending more money to support the economy after Congress had already approved more than $ 3 trillion in previous bills. The Fed has also bought trillions of dollars in Treasury bonds and other financial assets to hold credit through the economy.
Economists across the ideological spectrum have urged Congress to spend trillions more to boost unemployment benefits, prevent cuts in local government services and keep families from falling into crushing debt and homelessness. The Fed is also facing pressure from lawmakers and experts to broaden the qualification requirements for several of its emergency loan facilities, as small businesses and local governments do not see the same benefits as the stock market and financial sector.
Rosengren said Congress should expand support for unemployment insurance and local governments and help for small businesses. But he warned that these measures would be ineffective without progress with the pandemic.
“We have already provided the stimulus that I think would generate a good outcome for the economy if we had got the pandemic under control,” Rosengren said.
“It’s much more cost effective to wear people masks and social distance than it is to shut down the economy and get large transfer payments to people,” he added. “So if you are worried about the fiscal deficit, you should be even more worried that the pandemic is out of control.”