Federal Reserve Chair Jerome Powell is warning of the threat of a prolonged recession resulting from the viral outbreak and is urging Congress and the White House to act further to prevent long-lasting economic damage.
"Deeper and longer recessions can leave behind lasting damage to the productive capacity of the economy," Powell said Wednesday before an online discussion with the Peterson Institute for International Economics. "Avoidable household and business insolvencies can weigh on growth for years to come."
The Fed and Congress have taken steps to try to counter what could be a severe downturn resulting from the widespread shutdown of the U.S. economy. But Powell warns there still could be widespread bankruptcies among small business and extended unemployment for many people.
The U.S. government "ought to do what we can to avoid these outcomes, and that may require additional policy measures," Powell says.
On Tuesday, House Democrats unveiled a $3 trillion new coronavirus relief package, and promised a Friday vote on the measure.
The bill, which was posted Tuesday, comes in at more than 1,800 pages, and is entitled the "Health and Economic Recovery Omnibus Emergency Solutions Act."
It will offer a fresh round of $1,200 direct cash aid to individuals, increased to up to $6,000 per household and launches a $175 billion housing assistance fund to help pay rents and mortgages. There is $75 billion more for virus testing.
It would continue, through January, the $600-per-week boost to unemployment benefits. It adds a 15% increase for food stamps and new help for paying employer-backed health coverage. For businesses, there’s an employee retention tax credit.
There’s $200 billion in “hazard pay” for essential workers on the front lines of the crisis.
Powell said the Fed will "continue to use our tools to their fullest" until the viral outbreak subsides but gives no hint of what the Fed's next steps might be.
Greater support from government spending or tax policies "could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery," he said.
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