WASHINGTON >> Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell will present a mixed picture of the U.S. economy in testimony before Congress today 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.
In their prepared remarks, Mnuchin will offer a more optimistic forecast of the economy, saying he expects a rebound in the second half of the year. Powell, while acknowledging the recovery has begun sooner than expected, will still share 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 will tell members of the House Financial Services Committee.
The Treasury secretary will point to better-than-expected May employment numbers and retail sales figures to make the case that the economic recovery is underway. But he will also acknowledge 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 will say. “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 will warn that while consumer spending is rebounding strongly and the U.S. 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 will say. “While this bounceback in economic activity is welcome, it also presents new challenges — notably, the need to keep the virus in check.”
Powell will say that the economy’s future is “extraordinarily uncertain” and will depend on getting the virus under control.
“A full recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities,” he will say. “The path forward will also depend on the policy actions taken at all levels of government to provide relief and to support the recovery for as long as needed.”
More than 120,000 Americans have died from COVID-19, and cases have been rising since states began phased reopenings. 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.
Powell and Mnuchin are expected to face questions about how much more support is needed and what type of programs might be best suited to the recovery. Lawmakers are also expected to question both leaders about the existing programs and whether those are reaching the right corners of the economy.
Mnuchin has been criticized for being too secretive about how bailout money is being spent and is expected to note recent moves by the Treasury to provide more information to Congress.
The Fed has been posting monthly reports to its website, disclosing both the amount of use and beneficiary names for the programs backed by taxpayer money. It released the first detailed breakdown of its company-specific corporate bond purchases June 28.
Powell could also face questions about the Fed’s programs, particularly the one aimed at propping up the market for corporate debt. Some lawmakers have questioned why the Fed is buying corporate bonds at all, while others have expressed concern that the Fed is supporting big companies that do not need federal assistance.
The central bank acted swiftly to shore up markets and the economy as the pandemic locked the economy down in March and April, leaving millions unemployed and many businesses without revenue. The central bank has cut interest rates to near-zero, is buying huge quantities of government-backed debt and has rolled out a series of emergency lending programs — many of them backed by funding that Congress had given the Treasury Department specifically to support such efforts.
Powell and Mnuchin’s testimony is meant to focus on those emergency lending programs. Powell will describe the programs at length. Several have seen limited uptake as financial conditions have calmed, and as the private market or other government programs have met credit demand.