House Speaker Nancy Pelosi (D-CA) introduced a $3 trillion relief bill on Tuesday aimed at blunting the COVID-19 pandemic’s impact on the economy – the largest federal rescue since the New Deal in the 1930s.
The bill, named the Heroes Act, contains several measures that would shore up the housing market: $75 billion in mortgage relief and $100 billion for rental assistance that would support multifamily property owners who can’t pay loans if tenants don’t pay. Plus, there’s another round of direct payments to individuals, as well as an extension of the beefed-up unemployment benefits aimed at keeping Americans current on their bills during the worst pandemic in more than a century.
And, given that homes are located in towns and cities, the bill has another measure that would support real estate markets: Almost $1 trillion to state and local governments whose budgets have been wiped out from battling COVID-19. Without some form of federal support, typically provided to states after disasters, governors say they will be forced to lay off firefighters, police officers, paramedics and other essential community workers that keep towns and cities functioning.
On Wednesday, Pelosi got assistance from an unlikely Republican: Federal Reserve Chairman Jerome Powell, who spoke via teleconference to the Peterson Institute for International Economics.
Powell didn’t come out and directly support the House of Representatives bill, which Pelosi said would pass on Friday. Instead, he warned of “long-term economic damage” if Congress doesn’t act quickly to pass additional aid for families and businesses.
That puts Powell in opposition to Senate Majority Leader Mitch McConnell (R-TN) who last week said the three coronavirus spending packages totaling about $2.9 trillion that passed in the last two months are enough for now, and lawmakers should “take a pause” before considering additional measures.
It also blunted an argument Republicans have started raising about the federal debt, which has grown by more than $3 trillion during the Trump administration to a record $23.2 trillion in the fourth quarter, before the pandemic hit the U.S. in March.
Powell, a lifelong Republican and a deficit hawk who as recently as February was urging Congress to be more fiscally responsible, said failing to spend now will cost the U.S. more in the long run.
The nation is suffering the “biggest shock our economy has felt in modern times” and is likely to face an “extended period” of weakness if Congress doesn’t act quickly to provide additional aid, Powell said.
That dire outlook caused the Dow Jones Industrial Average to slide more than 600 points in the hours after he spoke.
The Fed has scrambled to support the economy with lending facilities and bond purchases, including mortgage-backed securities. Its balance sheet has expanded to a record $6.7 trillion, according to data released last week.
In his speech, Powell reminded listeners that while his power to support the economy is large, it’s limited.
“Recall that the Fed has lending powers, not spending powers,” he said.
Congress holds the purse strings, Powell said, as he urged lawmakers to use them.
“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. “This tradeoff is one for our elected representatives, who wield powers of taxation and spending.”