WASHINGTON (Sinclair Broadcast Group) — As Democrats and Republicans harden their positions on whether another round of emergency coronavirus relief legislation is merited and what it should include, a division is also emerging between the Treasury Department and the Federal Reserve over the urgency to act and the scale of assistance needed.
“It’s appropriate for us to try to figure out how we did well, what we missed, and what gaps need to be filled as we move toward the next installment,” Sen. John Cornyn, R-Texas, said in an interview with Sinclair Wednesday.
Cornyn dismissed a $3 trillion bill passed by the House last week as “more of a political statement” and insisted more accountability is needed for the unprecedented $3 trillion Congress already spent before spending even more. Much of the relief funding previously appropriated is still being distributed and it is not yet clear what impact some of those programs will have.
Still, the senator insisted lawmakers are working “all day, every day” to figure out what comes next. He stressed the need for liability protection for employers who follow public health guidance and suggested Republicans are open to more aid for states and local governments to address shortfalls directly caused by the coronavirus outbreak.
“We’re interested in helping anybody and everybody,” he said.
House Speaker Nancy Pelosi, D-Calif., seemed to cast doubt on that assertion, accusing Republicans of politicizing relief efforts despite an “absolutely urgent” need for more federal assistance. She also insisted some degree of bipartisan consensus on provisions in the House bill is inevitable.
“When they put forth their bills, CARES 1, when McConnell put that forth, everybody said, ‘Okay, let's respond to that.’ When I put forth our bill they said, ‘Oh, it's not bipartisan. How can we do this? It’s not bipartisan,’” Pelosi told MSNBC Tuesday. “His wasn't until it was. Ours isn’t until it will be.”
At a Senate Banking Committee hearing Tuesday, Treasury Secretary Steven Mnuchin prioritized reopening state economies, predicted a strong and rapid recovery, and downplayed the prospect of further federal spending to prop up the economy. Federal Reserve Chairman Jerome Powell took a different view, underscoring a need for more stimulus to address the crisis.
“The scope and speed of this downturn are without modern precedent and are significantly worse than any recession since World War II,” Powell told senators.
While the four relief bills already signed by President Donald Trump represent a far costlier stimulus effort than any in history, many economists say the severity of the economic downturn precipitated by the outbreak demands even more action.
“I think its quite clear we’ve done nowhere near what will need to be done,” said Erica Groshen, an economist at Cornell University and former commissioner of the U.S. Bureau of Labor Statistics.
Groshen likened the policy decision to shut down nonessential businesses and issue stay-at-home orders in most states to placing the economy in a medically-induced coma. Relief legislation passed so far has largely been devoted to keeping the patient alive while the threat is contained, and many of the existing benefits will only carry workers and businesses through June.
“When we get control of the situation... then we want to wake the economy up,” she said. “Then it will probably need real stimulus. And our political system and our administrative capacities move fairly slowly.”
Stan Veuger, a resident scholar at the American Enterprise Institute, expects high unemployment and low demand to persist into the fall, and the budget crisis facing state and local governments could have lasting ramifications. After lawmakers rushed through previous bills in a matter of days, he suggested they should be getting to work on the next relief package sooner rather than later.
“I think state and local governments, in particular, could use clarity ASAP,” Veuger said. “It would also be great to know if anything will come after the PPP program, and for Congress to think about how to design whatever the next program will look like. I worry that the next bill will again be a last-minute product with serious flaws.”
However, some analysts agree with congressional Republicans that now is the time to pump the brakes on spending and see what happens. In a report released Wednesday, Americans for Prosperity estimated nearly $2 trillion in federal funding is already available to state and local governments and argued that should be sufficient to cover their budget shortfalls.
“With a staggering amount of money at the state level, it’s clear that a massive federal bailout isn’t just bad policy – it’s not necessary. Our lawmakers need to make the tough choices they were elected to make and allocate the funds we already have responsibly,” said AFP Montana State Director David Herbst in a statement.
Others say if Congress does not act now, it will face even greater and costlier challenges down the road. Many experts are skeptical of predictions of a rapid economic recovery as long as Americans still fear contracting the coronavirus.
“Some politicians think that they can just turn a switch and 'open up the economy,' but that will not work out the way they think it will,” said Roland Rust, a professor at the University of Maryland's Robert H. Smith School of Business.
Several sectors of the economy have been severely damaged, including retail, hospitality, travel, and entertainment, and many small businesses are facing up to three months without revenue. With unemployment potentially topping 20% in the months ahead and some businesses struggling to access existing relief funds, Rust warned moving too fast to reopen businesses could exacerbate the economic damage.
“To get going again, companies need 1) customers who are willing to show up, 2) employees who are willing to show up, and 3) a slow and gradual re-hiring of their workforce, as health conditions improve,” he said.
Groshen brushed aside concerns about overspending and piling on government debt, arguing the middle of a crisis is not the time for that debate. Instead, lawmakers must consider what would be most helpful to businesses and workers to ensure they can bounce back on the other side and prevent a likely shorterm recession from turning into a lasting depression.
“This is really a pivotal time,” she said. “There is no case in the past where you can point to that the government overdid stimulus spending. We’ve never made that mistake. The mistakes we have made have always been too little, too late.”