Mnuchin and Powell warn of economic scarring, and offer divergent solutions

click to enlarge Treasury Secretary Steve Mnuchin and President Donald Trump during an update on the coronavirus small business relief plan at the White House in Washington, April 7, 2020. The White House and congressional Democrats on April 19 closed in on an agreement for a $450 billion economic relief package to replenish a depleted emergency fund for small businesses and to expand coronavirus testing around the country, with votes on the measure possible early this week. - DOUG MILLS/THE NEW YORK TIMES
Doug Mills/The New York Times
Treasury Secretary Steve Mnuchin and President Donald Trump during an update on the coronavirus small business relief plan at the White House in Washington, April 7, 2020. The White House and congressional Democrats on April 19 closed in on an agreement for a $450 billion economic relief package to replenish a depleted emergency fund for small businesses and to expand coronavirus testing around the country, with votes on the measure possible early this week.
By Alan Rappeport and Jeanna Smialek
The New York Times Company


WASHINGTON — The United States economy faces irreparable damage from the coronavirus, the nation’s top economic policymakers warned Tuesday, as lawmakers and the Trump administration grapple with how to restart business activity and whether additional government support is needed.

In a joint appearance before the Senate Banking Committee, Treasury Secretary Steven Mnuchin and the Fed chair, Jerome Powell, offered a stark assessment of the fragile state of the economy. But they offered divergent views about how to mitigate the economic hit from a virus that has shuttered significant amounts of business activity and has already thrown more than 20 million people out of work.


Mnuchin, who acknowledged a painful month ahead, suggested that an expeditious reopening of states was the key to preventing irreversible economic devastation.

“There is the risk of permanent damage” if states delay their reopenings, Mnuchin told lawmakers. While the Treasury secretary said job losses would get “worse before they get better,” he suggested that conditions would “improve in the third and fourth quarters” as states began reopening and business activity resumed.

Powell sounded a more cautious tone, saying that a full recovery would not take hold until the health crisis was resolved and people felt safe resuming normal activity. He suggested that Congress, the White House and the Fed itself might need to provide more help to carry states, households and businesses through the pandemic.

“This is the biggest shock we’ve seen in living memory,” Powell said, “and the question looms in the air of, is it enough?”


The differing views underscore the competing arguments gripping Washington as Congress and the White House begin debating the outlines of another major economic relief bill and whether to inject trillions of additional taxpayer dollars into the economy.

With an election six months away, President Donald Trump and many Republican lawmakers have begun trying to shift the economic discussion away from more financial support to boosting the economy by reopening states and additional tax cuts. The Trump administration has said it will veto a $3 trillion bill that Democrats proposed last week and has made clear that any additional legislation must include liability protection to insulate businesses against lawsuits from workers or customers who get sick.

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