In prepared remarks made to a Senate committee on Tuesday, Powell said the economy needs more help, and it needs it soon. Focusing primarily on the money Congress appropriated for the Fed’s lending programs, Powell credited that move with keeping the economy afloat during the coronavirus (COVID-19) pandemic.
“These programs serve as a backstop to key credit markets and have helped restore the flow of credit from private lenders through normal channels,” Powell told the Senate Finance Committee. “We have deployed these lending powers to an unprecedented extent.”
There’s $455 billion of CARES Act funds that have not been spent. Powell has asked that it be released for the Fed’s lending efforts, but Treasury Secretary Steven Mnuchin says the Trump administration thinks it would be better spent in providing aid directly to Americans and small businesses.
Partisan deadlock
Republicans and Democrats in Congress have not been able to agree on another round of stimulus help, even though both sides agree on several basic principles -- direct payments to Americans and help for small businesses.
The issue has taken on greater urgency with the arrival of December since several key provisions of the CARES Act expire at the end of this month. They include:
A moratorium on evictions for renters;
Suspended payments on student loans;
A tax credit for companies that retain their workforce;
$150 billion in aid to state and local government cannot be rolled into 2021;
A 13-week extension of unemployment benefits; and
Unemployment benefits for freelancers and contract workers.
‘Everything gets worse’
When these provisions expire at the end of the month, renters who are behind on their payments can be evicted, student loan borrowers must resume payments, businesses rewarded by the government for not laying off employees will no longer have that benefit, and millions of Americans could lose their unemployment benefits.
“Everything gets much worse on Dec. 31, with a lot of money running out and a lot of people in desperate straits,” Rep. David Price (D-N.C.), a senior member of the House Appropriations Committee, told the Wall Street Journal.
A vaccine may be in sight, but it could be months before a significant portion of the population is inoculated. In the meantime, Powell says the outlook for the economy is “extraordinarily uncertain.” He says a full economic recovery is unlikely until Americans are confident that it is safe to reengage in a broad range of activities.