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Continue to provide funding for the U.S. government-otherwise the economy recovering from the coronavirus pandemic may stagnate, just as the Delta variant threatens hard-won progress. This is an urgent message from Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell to American lawmakers on Tuesday.
Yellen and Powell testified before the Senate Committee on Banking, Housing, and Urban Affairs on the progress made by the United States in recovering from the worst recession since the Great Depression of 1929-1939. They also unequivocally warned that if Congress fails to pass a bill to fund the government and raise the country’s debt ceiling next month, then the risk still exists.
On Monday, Senate Republicans Emergency spending bill This will prevent the government from shutting down before October 1 and the expected federal debt default in mid-to-late October.
Yellen said that such a default could jeopardize people’s confidence in the U.S. dollar as a global reserve currency and delay social security payments, military salaries and other government payments that a large number of Americans depend on for their livelihoods.
“Congress must resolve the debt ceiling,” Yellen said in a prepared testimony on Tuesday. “If not, our current estimate is that the Treasury Department may exhaust its unconventional measures before October 18. At that time, we expect the Treasury Department to have very limited resources, which will soon be exhausted. The United States will This is the first default in history. All the confidence and credibility of the United States will be damaged, and our country is likely to face a financial crisis and economic recession as a result.”
She added that raising the debt ceiling is “necessary to avoid catastrophic events in our economy”, noting that since 1960, lawmakers from the country’s two main political parties have raised or suspended it 78 times.
US Federal Reserve Board Chairman Jerome Powell told lawmakers on Tuesday that he agreed with Secretary of the Treasury Janet Yellen that if the US debt defaults, there will be “destructive” consequences. [File: Kevin Dietsch/Pool via AP]Powell told lawmakers that he agreed with Yellen’s statement that if the United States defaults on debt, it will have “destructive” consequences.
“I think it is important to raise the debt ceiling in a timely manner to avoid any form of payment default, and the potential impact may be serious,” Powell said.
At the time of the hearing, a large number of economic data showed that the US recovery was slowing down, and pain points such as inflation and labor shortage continued. In some regions, the surge in coronavirus cases caused by the Delta variant—and the stagnation of vaccination rates across the United States—continues to threaten progress.
In her testimony, Yellen called the recovery “fragile but rapid,” while Powell testified that “the economic path continues to depend on the course of the virus, and the outlook remains at risk.”
Data released by the Conference Committee on Tuesday showed U.S. consumer confidence hits seven-month low Lynn Franco, the group’s senior director of economic indicators, said that in September, “the spread of the Delta variable continued to suppress optimism.”
Franco said in a statement: “Worries about economic conditions and short-term growth prospects have intensified, and spending intentions on households, cars and major appliances have fallen again.” “Short-term inflation concerns have eased, but they remain high. No less.”
In recent months, Americans have been struggling to cope with rising prices of everything from food to gasoline. Consumer price index rose 0.3% According to the US Bureau of Labor Statistics, August. All in all, consumer prices have increased by 5.3% from August last year.
On Tuesday, the latest Federal Housing Finance Agency house price index showed House prices rose 1.4% Compared with the previous month, there was an increase of 19.2% from July 2020 to July 2021.
At the same time, even if employers in certain industries try to lure them back through signing bonuses, higher wages and other incentives, millions of Americans are still unemployed.
Powell admitted that in terms of the labor market, the United States is still far from its goal. He testified that “Pandemic-related factors, such as the need for care and continued fear of the virus, seem to be putting pressure on job growth.”
“A rebound is never a foregone conclusion”
But both economic decision makers emphasized that the solution is not to cut spending now. Yellen and Powell emphasized in their testimonies that the U.S. economic recovery has largely benefited from fiscal policies that helped avoid a more severe recession, including US$2.2 trillion in Coronavirus Aid, Relief, and Economic Security (CARES). bill.
Powell said in his testimony on Tuesday: “In response to the crisis, we have taken extensive and powerful measures to support the flow of credit in the economy and promote the stability of the financial system at the beginning of the pandemic.”
“Between April and December 2020, the actions we took together helped release more than $2 trillion in funding to support large and small businesses, non-profit organizations, and state and local governments. This in turn helps To prevent organizations from shutting down and investing, as the economic recovery continues, employers can better retain workers and re-employ them.”
U.S. Treasury Secretary Janet Yellen said in testimony before lawmakers on Tuesday that the U.S. economy’s recovery from the coronavirus pandemic was “fragile but rapid” [File: Matt McClain/The Washington Post via AP, Pool]Yellen said that the passage of the CARES Act, the Comprehensive Appropriations Act and the U.S. rescue plan all helped the United States rebound.
“A rebound like this is never a foregone conclusion,” she said in her testimony. “In fact, the recovery in the United States is stronger than other rich countries. A key factor in our outstanding performance is the policy choices made by Congress over the past 18 months.”
But Republican senators questioned the two top economic decision makers about the necessity of all this financial aid. Some people believe that the United States is spending too much, and that the bill — in the form of swelling national debt — is about to expire.
Yellen pointed out that spending related to COVID-19 was authorized by the governments of former Republican President Donald Trump and current Democratic President Joe Biden, which makes raising the debt ceiling a bipartisan responsibility.
“Raising the debt limit allows us to pay the bills that arise from these actions and other actions of Congress,” Yellen said.
Need continuous support
Yellen and Powell appeared at a critical moment on Capitol Hill. Biden and Congressional Democrats are trying to win support for more government spending in the form of two bills: a $550 billion bipartisan infrastructure deal and a better reconstruction bill. Trillions of dollars worth of legislation will expand the social safety net of the United States. Democrats in the House of Representatives may vote on the infrastructure bill as early as this week.
Powell pointed out in his testimony that although part of the assistance provided under the CARES Act has ended, the Fed is committed to providing continuous support to the US economy because it is striving to achieve the goals of maximizing employment, price stability, and stability in the United States. Financial system.
Powell told lawmakers: “As long as the time required for recovery is completed, we at the Federal Reserve will do our best to support the economy.”
Powell and Yellen will next testify before the House Financial Services Committee on Thursday.
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