May 14, 2020 - Economy & Business

Powell joins the battle over fiscal spending

Dion Rabouin, author of Markets

Illustration: Eniola Odetunde/Axios

After the House of Representatives released a proposed $3 trillion relief bill on Tuesday, Fed chair Jerome Powell weighed in, backing calls for Congress to do more to battle the economic impact of the coronavirus pandemic.

Why it matters: Expectations for the pandemic-fueled recession are morphing from a short-term downturn to a potentially yearslong slog and economists are urging policymakers to adjust government spending accordingly.

  • Powell's comments Wednesday made him the latest and perhaps most influential voice in a chorus advocating more fiscal spending.

Driving the news: In pre-written remarks, Powell detailed the harms of "deeper and longer" recessions, warning that "the recovery may take some time to gather momentum and time can turn liquidity problems into solvency problems."

  • "Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery," Powell said during a webcast with the Peterson Institute for International Economics.

Between the lines: "Fed officials are unanimous on this — they are all in on, 'Congress has to do more,'" Claudia Sahm, a former top Fed economist and now director of macroeconomic policy at the Washington Center for Equitable Growth, said during a separate online event.

What's happening: Recent economic studies and business developments are starting to back Powell's worries that the Fed and Congress will need to provide assistance to the U.S. economy for some time.

  • In addition to the record high unemployment rate, thousands of business closures and wave of bankruptcies, new academic research estimates that 42% of recent layoffs will result in permanent job loss.

Yes, but: "Right now in the White House, we’re in wait-and-see mode," White House economic adviser Kevin Hassett said during a briefing with the Brookings Institution Tuesday.

  • Hassett argued that some of the big-ticket items in the House's so-called Heroes Act — which includes nearly $1 trillion for states and municipal governments, a second round of $1,200 direct payments for individuals, a $175 billion housing assistance fund, a 15% increase in food stamps and more — could be "putting the cart before the horse."
  • Republican senators also point to the annual U.S. budget deficit that has already topped $4 trillion as a reason for patience.

Yes, but, but: "We are in an election year and have had bipartisan support for lots of spending already," Kevin Barry, CIO of investment adviser CAPTRUST, tells Axios.

  • "Do I think there will be significant political interest in additional support? The answer is yes."

Go deeper:

Go deeper

Trump's week of viral quicksand

Data: NewsWhip; Chart: Andrew Witherspoon/Axios

Stories about President Trump's photo op at St. John's church after peaceful protesters were forcefully cleared from the area averaged the most online attention of any issue about the president this week.

Why it matters: Trump's force-over-compassion approach to the demonstrators protesting the murder of George Floyd had Republican allies backpedaling to keep a distance — and led to a wave of condemnations that got plenty of online traction on their own.

Biden formally secures Democratic presidential nomination

Joe Biden speaks at Delaware State University's student cente on June 5. Photo: Jim Watson/AFP via Getty Images

Former Vice President Joe Biden became the formal Democratic presidential nominee on Friday evening, per AP.

The big picture: Biden has been the presumptive frontrunner to take on President Trump since Sen. Bernie Sanders suspended his campaign in early April.

Updated 11 hours ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 9 p.m. ET: 6,724.516 — Total deaths: 394,018 — Total recoveries — 2,996,832Map.
  2. U.S.: Total confirmed cases as of 9 p.m. ET: 1,894,753 — Total deaths: 109,042 — Total recoveries: 491,706 — Total tested: 19,231,444Map.
  3. Public health: WHCA president says White House violated social-distancing guidelines to make reporters "a prop" — Jailing practices contribute to spread.
  4. Sports: How coronavirus could reshuffle the sports calendar.
  5. Jobs: Better-than-expected jobs report boosts stock market.
  6. Media: The Athletic lays off 8% of staff, implements company-wide pay cut.