WASHINGTON — Steven Mnuchin, the Treasury secretary, and Jerome H. Powell, the chair of the Federal Reserve, presented a mixed picture of the U.S. economy on Tuesday afternoon in testimony before Congress as lawmakers prepare for negotiations over another round of stimulus.
The joint appearance of America’s two top economic policymakers comes as the coronavirus pandemic is resurgent in many parts of the country, depressing business activity longer than many had expected and risking prolonged economic pain. Millions of Americans remain out of work, and most of the stimulus checks and small-business loan money that were approved in earlier bailouts have been distributed. Expanded unemployment benefits, which provided an extra $600 per week, expire at the end of July.
Mr. Mnuchin, who was wearing a mask but removed it while testifying, offered a more optimistic forecast of the economy, saying he expected a rebound in the second half of the year. Mr. Powell, who did not remove his mask while testifying, acknowledged the recovery had begun sooner than expected but sounded less sanguine amid continuing uncertainty about the virus.
“We are in a strong position to recover because the Trump administration worked with Congress on a bipartisan basis to pass legislation and provide liquidity to workers and markets in record time,” Mr. Mnuchin told members of the House Financial Services Committee.
Mr. Powell pointed to better-than-expected May employment numbers and retail sales figures to make the case that the economic recovery was underway. But he said the path forward would depend on both how the virus evolved and a willingness at “all levels of government” to provide policy support for as long as necessary.
“We have entered an important new phase and have done so sooner than expected,” Mr. Powell said. “While this bounce-back in economic activity is welcome, it also presents new challenges — notably, the need to keep the virus in check.”
Mr. Mnuchin signaled that the government was thinking about how to keep support flowing to companies and households as programs head for expiration.
“We will be beginning to have conversations about supplemental relief legislation,” Mr. Mnuchin said. “We would anticipate that any additional relief would be targeted to certain industries that have been especially hard-hit 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.”
More than 126,000 Americans have died from Covid-19, the diseased caused by the coronavirus, and cases have been rising since states began phased reopenings.
Dr. Anthony S. Fauci, the nation’s top infectious disease expert, warned lawmakers in a separate hearing on Tuesday that the number of new infections in the United States could more than double to 100,000 a day if the country failed to contain the surge now underway in many states.
Trump administration officials have said that they would not call for a full lockdown of the economy again, but many state and local officials are already delaying some of their reopening plans in an effort to tamp down the virus.
With millions of Americans still out of work and many businesses still shuttered or seeing lower levels of activity, lawmakers have begun discussing 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 a payroll tax cut, a capital-gains-tax holiday and new deductions to encourage spending on dining and entertainment.
Mr. Mnuchin revealed little about the White House’s vision for the next stimulus plan, which he said he hoped could come together in July. He suggested that the leftover money in the Paycheck Protection Program should be repurposed to help industries that had been hit hardest by the pandemic, and that he was prepared to engage in negotiations about relief for states and municipalities.
Fed officials, for their part, have emphasized controlling the virus as the first step in ensuring an economic rebound.
A resurgence of infections “could force people to withdraw” and “undermine public confidence, which is what we need to get back to lots of kinds of economic activity that involve crowds,” Mr. Powell said during his testimony, noting that he was not predicting that another wave would happen.
Other central bank officials who spoke on Tuesday joined him in warning that it was crucial to get the pandemic in check.
“The economy seems to have bottomed out, and we’re seeing some encouraging signs of a recovery,” Lael Brainard, a Fed governor, said on a panel at the Brookings Institution. “On the other hand, we’re seeing some resurgence of the virus. So right now, my focus is on steering through a very uncertain recovery.”
As infections persist, many areas of the economy continue to require government support. Lawmakers questioned Mr. Mnuchin and Mr. Powell about what more could be done to help minorities and businesses in rural communities. In some cases, the two policymakers are still struggling to figure out how to prop up struggling sectors.
Both Mr. Powell and Mr. Mnuchin said that they were interested in helping commercial real estate borrowers who have been hard-hit by the pandemic as tenants delay rent payments, but explained that it was difficult for them to do so.
“We have not yet figured out a way to set up a facility — it’s not out of a lack of interest, or a lack of desire,” Mr. Mnuchin said, suggesting that the next bill Congress passes may need to include some form of relief. Both he and Mr. Powell emphasized that the emergency central bank programs could provide only lending, not spending.
“More debt may not be the answer here,” Mr. Powell said. “There’s a serious problem here that needs to get fixed, and we’re racking our brains to see how — if there’s something we can do by lending.” Congress gave the Treasury Department $454 billion to support the Fed’s emergency lending programs, more than half of which remains uncommitted. But those programs can only offer loans and help companies to issue debt — they cannot provide outright grants, which is Congress’s wheelhouse.
Mr. Powell also described their challenges in funneling help to medium-size business through the Fed’s so-called Main Street lending program. Demand for the bank loans has been light, Mr. Powell said. And while thousands of banks should be eligible to lend through the program, which allows them to make associated fees while handing 95 percent of underwritten loans to the Fed, he said about 300 have registered.
“They’re not getting a ton of interest from borrowers,” Mr. Powell said of banks. “We continue to be open to playing with the formula and making adjustments going forward.”
Accountability was another major theme at the hearing. The Fed has been posting monthly reports to its website, disclosing both the amount of use and beneficiary names for the central bank lending programs backed by taxpayer money.
But lawmakers peppered Mr. Mnuchin with questions about where the broader package of government relief money was going, and Democrats accused him of not providing enough transparency about the Treasury Department’s efforts.
Mr. Mnuchin defended his record of transparency in managing the $2.2 trillion government bailout, but he said he would not commit to providing additional information to a panel of inspectors general that have accused him of stonewalling their requests.
This month, Michael E. Horowitz, the acting chairman of the new Pandemic Response Accountability Committee, and Robert A. Westbrooks, the committee’s executive director, warned in a letter that the Treasury Department lawyers’ interpretation would “present potentially significant transparency and oversight issues.”
Because of that determination, about $1 trillion of the stimulus funds are shielded from the committee’s oversight efforts. The funds include money for tribal governments already embroiled in a series of lawsuits, aid for states, nearly $500 billion for corporations, funds for aviation companies and the Paycheck Protection Program.
Representative Carolyn B. Maloney, Democrat of New York, pressed Mr. Mnuchin in his interpretation of the law and told him that Congress intended for the new committee to have access to information about how those funds were being deployed.
Mr. Mnuchin argued that Ms. Maloney’s interpretation was different from that of lawmakers in the Senate and that there were multiple layers of oversight that he was trying to accommodate. He said that he would ask his inspector general to work with the committee to address its concerns.
“We have full transparency,” Mr. Mnuchin said.
SOURCE : https://www.nytimes.com/2020/06/30/us/politics/mnuchin-powell-congress-economic-recovery.html