Former Federal Reserve Chair Janet Yellen and a top economic adviser to former Vice President Joe Biden on Tuesday excoriated lawmakers for recessing without reaching a deal on sorely needed fiscal aid.
In a New York Times column published Tuesday, Yellen and Jared Bernstein — a senior fellow at the Center on Budget and Policy Priorities (CBPP) — ripped Congress for failing to extend enhanced unemployment benefits, federal eviction protections and more aid for local governments after a spike in coronavirus cases slowed the U.S. economy.
Yellen and Bernstein, both Democrats who are advising Biden on economic policy, took aim at the Republican-held Senate. But they warned that the failure of both parties to find a compromise will plunge millions of vulnerable Americans into financial peril and derail the broader economy.
“If senators still fail to resolve stalled negotiations when they return after Labor Day, millions of needy Americans will suffer — and the overall economy could degrade from its current slow rebound in growth to no growth at all,” Yellen and Bernstein wrote.
“The economics of this moment are not complicated: A self-sustaining recovery cannot occur unless the virus is controlled,” they continued.
Yellen and Bernstein’s criticism comes nearly a month after pillars of the fiscal support passed through the Coronavirus Aid, Relief and Economic Security Act expired. A $600 weekly boost to unemployment benefits and federal bans on evictions and foreclosures all expired July 31. The window to apply for emergency small business relief loans through the Paycheck Protection Program also closed Aug. 8, soon after several states reimposed restrictions meant to curb the spread of the novel coronavirus.
While Republicans and Democrats broadly agreed on the need for another stimulus bill, they were unable to overcome major divides over how to supplement unemployment benefits, how much more aid to provide to local governments, and pandemic-related liability protections for businesses.
The Senate recessed on Aug. 14, one week after the House left for the summer, with each chamber blaming the other for the stalemate. Both sides acknowledged that progress toward a bipartisan deal was unlikely until Congress reconvenes Sept. 8, leaving economists across the ideological spectrum baffled and concerned.
Yellen and Bernstein cited a troubling decrease in consumer confidence and increase in food insecurity — particularly among Black and Latino households — as the costs of Congress’s inaction.
“These numbers reflect the confluence of at least three forces: acceleration of the spread of the virus; expiration of the supplemental federal unemployment benefits; and the ending of various eviction moratoriums,” they wrote.
“All three developments disproportionately affect low-income people and persons of color. And aside from the grave ethical questions raised by ending crucial safeguards for the vulnerable, such actions endanger the economy as a whole,” they added.
Yellen and Bernstein also compared fiscal shortfall to the aftermath of the 2007-08 financial crisis and recession.
As the onset of the virus triggered an economic collapse in March, the Fed — as it did in 2008 — slashed interest rates to near-zero levels and deployed trillions in emergency loans and asset purchases to support the economy. But Congress clamped down on fiscal support in 2011 after the 2010 election brought a Republican takeover of the House fueled largely by concerns about the debt.
“The Fed chair at the time, Ben Bernanke, summarized the problem well when he said, ‘With fiscal and monetary policy working in opposite directions, the recovery is weaker than it otherwise would be,’” Yellen and Bernstein wrote.
“So why, then, are we back here again?” they wrote. “Why is [Fed Chair Jerome] Powell having to make the same pleas to Congress that Mr. Bernanke did and why is a Fed chair being ignored again?”