Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell say more must be done to limit the damage from the coronavirus pandemic and to promote a full economic recovery in the United States.
While both struck upbeat notes about the future of the economy in prepared testimony Tuesday before the House Financial Services Committee, they also warned that the economy needs help.
It marked the first joint appearance by the two economic leaders in their current jobs and it was Yellen’s first congressional appearance since taking over as Treasury secretary.
Yellen thanked Congress for passing President Joe Biden’s $1.9 trillion American Rescue Plan, which was approved with only Democratic support. All Republicans in the House and Senate opposed the measure.
“With the passage of the Rescue Plan, I am confident that people will reach the other side of this pandemic with the foundations of their lives intact,” Yellen said. “And I believe they will be met there by a growing economy. In fact, I think we may see a return to full employment next year.”
The economy fell into a deep recession a year ago and though it began to mend by summer, nearly 10 million of the jobs lost have not been recovered.
Powell testified that a recovery is far from complete, so the Fed will “continue to provide the economy the support it needs for as long as it takes”.
The Fed will “not lose sight of the millions of Americans who are still hurting, including lower-wage workers in the services sector, African Americans, Hispanics and other minority groups that have been especially hard hit,” Powell said.
The Fed kept its benchmark interest rate at a record low of 0 percent to 0.25 percent at its meeting last week and even though it significantly boosted its economic forecast, it continued to signal that its benchmark rate would remain unchanged through 2023.
Under the March 2020 COVID-19 relief law, the Treasury secretary and Fed chairman are required to testify before Congress on a quarterly basis to provide updates. Powell and Yellen will appear Wednesday before the Senate Banking Committee.
Yellen on Tuesday pledged a rapid roll-out from the Treasury of the new relief plan. She noted that within the first week after the legislation was signed into law, the Treasury and the Internal Revenue Service have distributed more than 90 million direct payments that provide $1,400 to qualifying individuals.
Yellen said since she took office two months ago, she has been focused on making sure that relief gets quickly to the areas of greatest need such as the “smallest small businesses, which are disproportionately owned by women and people of colour”.
Yellen said the Paycheck Protection Program that was created by last year’s legislation often did not reach the smallest businesses. She said the Treasury was working with the Small Business Administration to “tweak” how the programme is implemented so that the loans, which the government forgives if businesses don’t lay off their workers, can reach millions more microbusinesses, especially those in rural and low-income areas.
The new relief package will also provide more than $30bn to help renters and homeowners at risk of being evicted, Yellen said. She said the administration of former President Donald Trump had put in place rules that required tenants and landlords to provide a large amount of documentation to get rental assistance – documentation that the Biden administration is reducing.
“We’re cutting through the red tape for them, while still taking reasonable steps to prevent fraud and abuse,” Yellen said.