The Treasury secretary and Fed chair said economic damage could last. One prescribed rapid reopening, the other robust policy action.
The United States economy faces irreparable damage from the coronavirus, the nation’s top economic policymakers warned on 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 H. 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.
Mr. 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, Mr. 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.
Mr. 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,” Mr. 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 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.
In a sharp exchange during Tuesday’s hearing, Senator Sherrod Brown of Ohio, the top Democrat on the Banking Committee, accused Mr. Mnuchin of prioritizing the stock market over public health.
“How many workers should give their lives to increase our G. D. P. by a half percent?” Mr. Brown asked. “You’re pushing people back into the workplace.”
The Treasury secretary fired back, calling the characterization “unfair.”
Congress has already approved trillions in financial support to help businesses and workers, including $500 billion for the Treasury Department, which is using most of those funds to backstop Fed programs aimed at keeping credit flowing through the economy.
But with 20 million people already out of work and new infections continuing, there are growing concerns that the economy could need another financial boost to prevent businesses from failing and more workers from losing their jobs.
