Lack of fiscal aid prompts ‘tragic’ economic impact, Powell warns

Lack of fiscal aid prompts ‘tragic’ economic impact, Powell warns

The Federal Reserve’s chair warned of a weak and prolonged recovery if the Congress would not pass another stimulus package to support families and businesses hit by the pandemic.

It appears that the U.S. economy yet again faces another trouble as talks about further fiscal aid is still in gridlock. But the Fed’s chair is also worried it would not only strain the country’s economic recovery but that it would also exacerbate racial and wealth disparities.

Lack of fiscal aid strains recovery

During his speech for the National Association for Business Economics on Tuesday, October 6, Fed’s chair Jerome Powell warned that in order to achieve a strong recovery, the government would need to provide more monetary aid to the people.

Otherwise, the country could face “tragic” economic consequences—specifically the deepening issues of racial and wealth disparities in the U.S.

Per Associated Press, Powell explained that:

“Too little support would lead to a weak recovery, creating unnecessary hardships for households and businesses. Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy, and holding back wage growth.”

He then continued saying that the recovery would be “stronger and move faster” if both monetary and fiscal policy continues to “work side by side to provide support to the economy until it is clearly out of the woods.”

But Ed Yardeni, who is a veteran strategist and the president of Yardeni Research, opposed Powell’s warning. He said that the U.S. economy will continue to recover even without more monetary aid.

Republicans have warned against the passing another stimulus package as well, citing too much fiscal aid is a disincentive for people to go back to work.

Trumps’ erratic tweets

Meanwhile, President Donald Trump tweeted about cutting off talks over another fiscal aid an hour after Powell gave his speech. Per the tweet, the president wants to halt the discussion until after the November elections.

But hours later, the president tweeted again, asking the Congress to “immediately” approve another round of $25 billion of stimulus aid for airlines and $135 billion of Paycheck protection Program for small businesses.

Representative Alexandria Ocasio-Cortex, on the other hand, was quick to call out Trump’s erratic decisions.

In her interview with MSNBC, the representative emphasized how crucial the stimulus package is for the people and that the U.S. economy would be “staring down the barrel” of one of the biggest mass evictions since the Great Depression.

House Speaker Nancy Pelosi and treasury secretary Steven Mnuchin have been repeatedly in the discussion concerning the matter. And, even now, the possibility of further fiscal aid for hard-hit sectors and an extension of unemployment benefits remains uncertain.

On Wednesday, U.S. stocks soar as much as 1.3%.

Featured image courtesy of Federal Reserve/Flickr

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