As lawmakers battle over another stimulus package, Federal Reserve Board Chairman Jerome Powell told Congress a recovery would be at risk if federal relief is withdrawn from Americans and the nation’s small businesses.
“I would think that it would be a concern if Congress were to pull back from the support that it’s providing too quickly,” Powell said Wednesday (June 17) while answering questions before the House Committee on Financial Services.
Bloomberg News reported Powell was answering a question from U.S. Rep. Maxine Waters, the California Democrat who chairs the committee.
“I do think it would be appropriate to think about continuing support for people who are newly out of work and for smaller businesses who are struggling,” Powell added. “The economy is just now beginning to recover. It’s a critical phase and I think that support would be well-placed at this time.”
But U.S. Rep. Patrick McHenry (R-North Carolina), the party’s ranking member on the committee, issued a warning to the chairman of the country’s central bank. “Monetary and fiscal policy are two very different things. I would urge you and the leadership of the Fed to stick to monetary policy,” McHenry said.
In May, the Democratic-controlled House passed a $3 trillion spending package on mostly party lines. It includes a second round of direct cash payments to Americans, extends the federal $600 a week unemployment benefits through January, provides hazard pay for frontline workers and expands COVID-19 testing, contact tracing and treatment.
But Republicans have said they are not prepared to provide another round of cash assistance.
Senate Majority Leader Mitch McConnell (R-Kentucky) has raised questions about the mounting costs, noting there’s potential to jeopardize the nation’s economic health with more debt.
“We need to push the pause button here and think through the next step,” McConnell said.
On the question of whether Congress should let the enhanced unemployment benefits expire at the end of July, Powell said the Fed has heard from all sides. Some employers say workers won’t return to their jobs because they’re earning more with the added free cash; others are hesitant to go back for health reasons; and some who worked in the leisure and hospitality sector may not have jobs to return to any time soon, he added.
“I would just say it probably is going to be important that it be continued in some form,” Powell said of the expanded unemployment insurance payments. “You wouldn’t want to go all the way to zero on that.”