US treasury secretary, Fed chief differ about reopening economy amid COVID-19 fallout

WASHINGTON - US Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell on Tuesday offered lawmakers different views about how to reopen the economy disrupted by the COVID-19 pandemic, which has caused more than 20 million job losses across the country.

At a virtual hearing held by the Senate Banking Committee, Mnuchin said the United States should find ways to reopen the economy and bring people back to work as the country is continuing to "see large unemployment and other negative indicators" in the second quarter of this year.

"It is important to realize that the large number represents real people. This is why it is so important to begin bringing people back to work in a safe way," he said, warning there is "risk of permanent damage" if the US economy does not reopen soon.

"We don't intend to send anybody back to work without the protections," said the treasury chief. "I couldn't be more proud of the medical advice that we're getting and the way the economy is opening up in a safe way."

However, Powell struck a more cautious tone, stressing the importance of getting the virus under control as more than 40 states have loosened restrictions to allow some businesses to restart after months of lockdowns.

"The number one thing of course is people believing that it's safe to go back to work so they can go out, and that's about having a sensible, thoughtful reopening of the country," he said, adding it will be a combination of getting the virus under control, including development of therapeutics and vaccines.

"You can change the formal social distancing measures, but ultimately people are going to decide what they should and shouldn't do with themselves and with their families," Powell said, suggesting sectors such as tourism and hospitality would take more time to recover from the pandemic.

"While allowing employers to reopen will enable some people to return to work, it is not a panacea for our economic challenges, which again are rooted in public health concerns," echoed Boston Federal Reserve Bank President Eric Rosengren.

Addressing the New England Council on Tuesday, Rosengren noted that as long as social distancing is necessary, many industries with the sharpest job cuts will likely face reduced demand.

A number of Democrats at the hearing attacked the White House's response to the pandemic. Democratic senator Sherrod Brown of Ohio accused the Trump administration of prioritizing stock market performance over public health.

"The administration thinks we should put more workers at risk to juice the stock market. They haven't come up with a basic plan for how to protect workers when they go back to work," Brown said. "How many workers should give their lives to increase the GDP or the Dow Jones by 1,000 points?"

As of Tuesday, the United States has reported more than 1.5 million confirmed COVID-19 cases and over 91,000 deaths, according to Johns Hopkins University.

The nonpartisan Congressional Budget Office estimated Tuesday that US real gross domestic product will contract by 11 percent in the second quarter due to the pandemic and social distancing measures taken to contain it, which is equivalent to a decline of 38 percent at an annual rate.

The number of Americans employed in the second quarter will be almost 26 million lower than the number in the fourth quarter of 2019, according to the CBO.

"I do think we need to take a step back and ask over time is it enough, and we need to be prepared to act further, and I would say we are if the need is there," Powell said, suggesting Congress and the central bank might need provide more financial aid to states, businesses and individuals to help the economy weather the pandemic.