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Treasury Secretary Steven Mnuchin and Fed Chair Jay Powell bump elbows before House hearing on Tuesday. Photo: Joshua Roberts/Pool/AFP via Getty Images

Federal Reserve Chairman Jerome Powell told the House Financial Services Committee on Tuesday that the expiration of Congress' coronavirus stimulus will weigh on the U.S. economy.

Why it matters: Powell warned that the effects of dried-up benefits are a looming risk to the economy, even if the consequences aren't yet visible.

  • A number of measures passed in the CARES Act — including an extra $600 in unemployment benefits — have expired or run out, with no replacements in sight.
  • Congress remains deadlocked over additional economic stimulus, and the looming Senate fight over Supreme Court Justice Ruth Bader Ginsburg's replacement is likely to keep the stimulus on the back-burner through November.

What he's saying: "What's happened lately is that the economy has proved resilient, both to the broader spread of the [coronavirus] ... and also to the expiration of the CARES Act benefits," Powell said.

  • But while the economy tries to recover from the pandemic's pummeling, Powell said the economy will eventually feel the negative effects of these measures expiring. "We don't know which of those two forces will dominate."

One major risk: Unemployed Americans over time go through their savings because they haven't yet found a job — without a financial cushion to fall back on.

  • "Their spending will decline ... and so the economy will begin to feel those negative effects at some time," Powell said.

The big picture: Data shows the economy and labor markets have improved since the onset of the pandemic. Still, 11 million more people remain unemployed compared to before the coronavirus hit.

  • "That's a long way to go" for recovery, Powell said.
  • He said the recovery "will go faster if it's all government working together" — a nod for Congress to step up and pass another stimulus package.

Yes, but: While Powell noted most economic forecasters, including the Fed, anticipate more congressional aid, he didn't specify how big of a fiscal package the Fed was expecting.

  • Treasury Secretary Steven Mnuchin, who testified alongside Powell, told Congress that a targeted stimulus package is necessary.

Go deeper: The price of Washington's stimulus failure

Go deeper

Dec 30, 2020 - Politics & Policy

Mnuchin: Americans to start receiving $600 stimulus payments from tonight

Treasury Secretary Steven Mnuchin during a December House Financial Services Committee hearing in Washington, D.C. Photo: Getty Images

Treasury Secretary Steven Mnuchin announced Tuesday the second round of coronavirus relief stimulus payments were being sent to millions of Americans.

The big picture: As President Trump and others continue to press Senate Majority Leader Mitch McConnell (R-Ky.), who blocked Democrats' request to hold a vote on a House measure to boost the size of the checks to $2,000 per person, Mnuchin tweeted that the $600 payments "may begin to arrive in some accounts by direct deposit as early as tonight" and that paper checks would begin to be mailed Wednesday.

26 mins ago - World

U.S. intelligence expects a stormy year in the Middle East

A technical team explodes remnant ammunition near Sirte, Libya. Photo: Mohammed Ertima/Anadolu Agency via Getty

Ongoing conflicts, economic crises and the fallout from COVID-19 will likely destabilize several countries in the Middle East in 2021 and could even put some on the brink of collapse, according to the U.S. intelligence community's annual Threat Assessment Report, released on Tuesday.

Why it matters: The report is the most comprehensive assessment the intelligence community produces every year. It paints a portrait of conflicts, insurgencies, terrorism and protest movements across the Middle East.

Updated 28 mins ago - Politics & Policy

Officer Kim Potter arrested, charged with manslaughter in Daunte Wright's death

Photo: Bruce Bisping/Star Tribune via Getty Images

Kim Potter, the former police officer who fatally shot Daunte Wright outside Minneapolis on Sunday, was arrested and charged by Washington County Pete Orput with second-degree manslaughter on Wednesday.

Why it matters: The shooting of the 20-year-old Black man in Brooklyn Center, Minn., just ten miles from where George Floyd was killed by a Minneapolis police officer last year, has reinvigorated Black Lives Matter protests and led to three consecutive nights of unrest.