WASHINGTON — Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell presented a mixed picture of the US economy in testimony before Congress on Tuesday afternoon 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 prolonging the 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.
Mnuchin, who removed his mask while testifying, offered a more optimistic forecast of the economy, saying he expects a rebound in the second half of the year. Powell, who did not remove his mask while testifying, acknowledged the recovery has begun sooner than expected but shared a less sanguine forecast amid ongoing 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,” Mnuchin told members of the House Financial Services Committee.
Powell pointed to better-than-expected May employment numbers and retail sales figures to make the case that the economic recovery is underway. But he acknowledged that some sectors such as retail and travel will need additional relief from the federal government.
“We will be beginning to have conversations about supplemental relief legislation,” 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.”
Powell warned that while consumer spending is rebounding strongly and the US economy has entered a recovery phase earlier than many expected, a full rebound is unlikely until the pandemic is contained and Americans feel comfortable resuming their normal lives.
“We have entered an important new phase and have done so sooner than expected,” Powell said. “While this bounceback in economic activity is welcome, it also presents new challenges — notably, the need to keep the virus in check.”
Powell said that the economy’s future is “extraordinarily uncertain” and will depend on getting the virus under control. A second wave of the virus, Powell said, “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.”
More than 120,000 Americans have died from COVID-19, and cases have been rising since states began phased reopenings.
Dr. Anthony Fauci, the nation’s top infectious disease expert, warned lawmakers in a separate hearing Tuesday that the number of new infections in the United States could more than double to 100,000 a day if the country fails to contain the surge that is 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.
Lawmakers continued to pepper Mnuchin with questions about how bailout money is being spent and Democrats accused him of not providing enough transparency about its efforts.
Mnuchin defended his record of transparency in managing the $2.2 trillion government bailout but said he would not commit to providing additional information to a panel of inspectors general that have accused him of stonewalling their requests.