Federal Reserve Chairman Jerome Powell warned Wednesday that the economic damage caused by the coronavirus outbreak could lead to a prolonged recession and urged Congress and the White House to act even further.
The Fed has taken steps to counter the negative effects of what is essentially an economic shutdown, such as cutting interest rates and creating emergency loans. Powell warns that the government must do even more, the Associated Press reports.
“Deeper and longer recessions can leave behind lasting damage to the productive capacity of the economy,” he explained.
Powell’s comments come one day after House Democrats introduced a $3 trillion dollar coronavirus relief bill, which is itself the fourth phase of relief legislation.
Although the federal government has spent trillions of dollars to counter economic damages, Powell said that the coronavirus has already taken a heavy toll on the economy.
More than 100,000 small businesses have permanently closed, the largest number of small business bankruptcies since the Great Depression. Thirty million unemployment claims have been filed during the pandemic, equal to around 9% of the population.
Powell said that a larger government response would be “worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery.”
He said that government spending and tax policies would prevent a long-term recession and lead to a stronger economic recovery. The American economy shrank 4.8% in the first quarter of 2020, according to the Bureau of Economic Analysis, and President Donald Trump predicted in March that the economy could be headed for a recession.
In addition to coronavirus relief legislation, various proposals have been floated in Congress and the White House in order to curb the pandemic’s economic effects, such as Trump’s announced payroll tax cut, as well as plans to provide cash relief or increase loans for businesses.
Some politicians like Republican Kentucky Sen. Mitch McConnell and Republican Louisiana Sen. John Kennedy, are skeptical of more legislative proposals. (RELATED: Sen. Rubio Urges Trump Administration To Protect Worker Interests With Paycheck Protection Program)