WASHINGTON — Jerome H. Powell, the Federal Reserve chair, delivered a blunt message to Congress and the White House on Tuesday: Faced with a once-in-a-century pandemic that has inflicted economic pain on millions of households, go big.
Hours later, President Trump delivered his own message: Forget it.
In a series of conflicting tweets, the president said the economy was “doing very well” and coming back “in record numbers,” suggesting that no additional help was needed while also saying that he would wait until after the election to “pass a major Stimulus Bill that focuses on hardworking Americans and Small Business.”
While the chances of Congress reaching a deal on another package were already slim, Mr. Trump’s directive sent markets swooning as the reality sank in that the economic recovery, which is slowing, would not get another jolt before Nov. 3. The S&P 500 fell more than 1 percent soon after Mr. Trump’s tweet, after having been higher in the moments before.
In deciding to forego any more immediate relief, Mr. Trump could be setting the economy up for the type of painful and “tragic” outcome that Mr. Powell warned about on Tuesday. The Fed chair, who has increasingly called for more government help, said policymakers should err on the side of injecting too much money into the economy rather than too little.
“Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” Mr. Powell said in remarks before the National Association for Business Economics.
“Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy and holding back wage growth,” he said. “By contrast, the risks of overdoing it seem, for now, to be smaller.”
Nearly seven months into the pandemic, millions of Americans remain unemployed as the coronavirus keeps many service industries operating below capacity. The unemployment rate has fallen more rapidly than many economists expected, dropping to 7.9 percent in September, and consumer spending is holding up. But Mr. Powell again highlighted that the economy’s resilience owed substantially to strong government assistance that has been provided to households and businesses.
That included direct payments to families, forgivable loans to small businesses and an extra $600 per week in unemployment benefits, which Mr. Powell said had “muted the normal recessionary dynamics that occur in a downturn,” like a hit to spending that causes additional layoffs.
But that assistance has since run dry, putting what Mr. Powell called an “incomplete recovery” at risk without the government pumping more money into the economy.
“There is still a long way to go,” he said regarding jobs, adding that “there is likely to be a need for further support” given “many will undergo extended periods of unemployment.”
The comments were a clear signal that the Fed remained worried about the economy’s ability to continue its rebound without more government spending to prop up struggling households and businesses. One big risk, Mr. Powell noted, was that prolonged economic weakness could perpetuate job losses that have weighed most heavily on women, people of color and low-wage workers.
“A long period of unnecessarily slow progress could continue to exacerbate existing disparities in our economy,” he said. “That would be tragic, especially in light of our country’s progress on these issues in the years leading up to the pandemic.”
Ernie Tedeschi, a policy economist at Evercore ISI, said that while Mr. Powell had made similar statements in the past, “this was more urgent.”
“I get the sense that he is getting worried that if we don’t have another fiscal package, that the recovery we’ve had may be in jeopardy,” Mr. Tedeschi said.
Mr. Powell has become an important influence for members of Congress during the pandemic recession, pushing for continued economic support and emphasizing that concerns about whether the government is taking on too much debt can wait until the crisis has passed. Speaker Nancy Pelosi of California and Representative Richard E. Neal of Massachusetts, are among the Democrats who have cited his advice when discussing their efforts to pass more stimulus.
Yet despite Mr. Powell’s increasingly frequent calls for sustained government help, lawmakers had been unable to reach agreement on additional aid for out-of-work families, struggling local governments and hard-hit businesses, including airlines. House Democrats passed a $2.2 trillion stimulus plan last week, but the White House and Republicans have rejected that price tag as too big.
Top Trump administration officials have played down the need for another big fiscal package by pointing to the falling unemployment rate as a sign that the economy is experiencing a rapid rebound. And many Republican lawmakers have begun publicly fretting about the ballooning federal deficit, which is expected to top $3 trillion this year.
The Fed chair did not weigh in on what sort of package was appropriate. But Mr. Powell, who has a long track record of worrying about the federal debt, has tried to persuade lawmakers that “this is not the time to give priority to those concerns.”
Instead, he has reiterated time and again the importance of returning the economy to full strength, and that both the Fed and Congress need to continue to provide help.
“This will be the work of all of government,” Mr. Powell said. “The recovery will be stronger and move faster if monetary policy and fiscal policy continue to work side by side to provide support to the economy until it is clearly out of the woods.”
In his tweets, Mr. Trump said he wanted the Senate to instead focus on getting his Supreme Court nominee, Judge Amy Coney Barrett, confirmed.
But Mr. Powell, along with many of his Fed colleagues, has also made clear that monetary and fiscal policy can only do so much to buttress the economy and that the recovery will be determined in large part by the path of the virus.
Mr. Powell, whose institution is set up to operate independently of the White House, was unambiguous in recommending a solution, one that contrasts with the message and example that has at times been held out by the Trump administration.
“We should continue do what we can to manage downside risks to the outlook,” Mr. Powell said, adding that doing so required “following medical experts’ guidance, including using masks and social-distancing measures.”
One of his colleagues was more blunt — and more worried.
“Because of the United States’s inability to control the virus, we’ve experienced approximately 21 percent of the world’s deaths, despite housing only about 4 percent of the world’s population,” Patrick T. Harker, the president of the Federal Reserve Bank of Philadelphia, said in a separate speech on Tuesday.
The virus is still circulating even as cases come down in some places, Mr. Harker said, and “in recent days, we’ve even seen alarming spikes in other areas, like New York City, that we had hoped had permanently suppressed their infection rates.”
The Fed itself has gone to great lengths to support the economy, cutting interest rates to near-zero in March, rolling out a large bond-buying program and setting up emergency lending efforts, many of them backed by Treasury Department funding.
While the Fed invoked its emergency powers in the 2008 recession, it has gone even further this time, buying municipal debt and corporate bonds to shore up key markets.
Mr. Powell said he did not regret rolling out those programs, which had never been tried before and have faced criticism from lawmakers and watchdog groups.
Some argue that the state and local government program isn’t generous enough. Others insist that the corporate program should come with more strings — like employee retention requirements. Such restrictions would have been difficult or impossible to carry out in the Fed’s current corporate bond program.
“I don’t know how I would have been able to explain to the public that we didn’t go to the limit of what we can do,” Mr. Powell said during a question-and-answer session after his remarks. “History will judge how well we did.”