GOP Cites Powell in Defending Their Wait-and-See on New Stimulus
GOP Cites Powell in Defending Their Wait-and-See on New Stimulus
(Bloomberg) -- Republicans are defending their reluctance to swiftly pass another round of pandemic relief by saying that Federal Reserve Chairman Jerome Powell, who backs further action to prop up the ailing U.S. economy, hasn’t specified that more is needed immediately.
Senate Majority Leader Mitch McConnell, who has sought to tap the brakes on federal stimulus spending, said Thursday that Powell hasn’t explicitly said how quickly lawmakers should act. McConnell spoke a day after the central bank chief warned that the U.S. economy faces unprecedented risk if additional fiscal support doesn’t come through.
“The Chairman of the Fed is correct and we do anticipate having to act again at some point,” McConnell said in an interview on Fox News. “I do think though in terms of timing, the Chairman of the Fed didn’t say how quickly, and we need to verify how we have done so far and make sure whatever mistakes we have made we don’t want to repeat.”
Both Democrats and Republicans have tried to use the Fed to win legitimacy for their initiatives, and McConnell’s comments are the latest effort by Republicans to win support for a pause in coronavirus aid. Powell has avoided speaking about the timing of any legislation, and his consistent message in recent weeks is that lawmakers should be prepared to do more.
House Democrats plan to pass a $3 trillion stimulus package on Friday, citing further deterioration of the U.S. economy as the coronavirus outbreak grinds on. But Republicans including McConnell have declared the bill an assemblage of liberal wish-list items that won’t be considered in the Senate.
Republicans are trying to put the brakes on passing another virus relief package and President Donald Trump has said he’s in “no rush” to pump more aid into the economy. But House Speaker Nancy Pelosi has repeatedly cited Powell’s statements as she has promoted Democrats’ plan for new aid.
During a call with House Republicans last week as Democrats were crafting their latest proposal, Powell reinforced the need for stimulus but did not indicate that Congress should act immediately, according to two people familiar with his remarks. GOP lawmakers took that to mean they have some leeway on the timing of the plan, the people said, on condition of anonymity to discuss closed-door conversations.
Powell has gone further in private conversations with administration officials, saying that he’s not opposed to waiting to see how the economy responds to the spending bills enacted in March and April, according to three other people familiar with those discussions.
A Fed spokesperson said that Powell has not spoken specifically about the timing of any legislation, and pointed to the central bank chief’s previous public comments. A White House spokesperson declined to comment.
In his public remarks since the economic shutdown starting in mid-March, Powell has consistently called on lawmakers to consider that Fed programs are about lending, not spending, and that the central bank’s temporary bridge loans to businesses may not be enough.
His remarks Wednesday at the Peterson Institute for International Economics raised the notion that the government may have to consider further stimulus.
“The passage of time can turn liquidity problems into solvency problems,” Powell said. “Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery. This trade-off is one for our elected representatives, who wield powers of taxation and spending.”
Minneapolis Fed President Neel Kashkari added his support for more action by Congress.
“If this is a slow recovery, the way I think it is -- I think we’re in this for months, a year, 18 months -- there are going to be a lot of families that are going to need direct financial assistance,” Kashkari said Thursday during a virtual event with CBS.
Treasury Secretary Steven Mnuchin said policy makers need more time to measure the impact of trillions of dollars already poured into the economy before proceeding with additional stimulus.
“Our view is let’s take a step back for a few weeks and let’s see how the $3 trillion is working,” Mnuchin said Thursday on Fox Business Network. “We’re just beginning to see the impact on that.”
While Democrats say that their new aid bill is needed immediately to prevent a second Great Depression, Republicans say more data is needed before passing any more aid. Many Republicans are holding out hope that states will successfully be able to reopen in the coming weeks and obviate the need to add more to this year’s record breaking budget deficit.
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