At a hearing on CARES Act oversight before the U.S. Senate Committee on Banking, Housing and Urban Affairs, Treasury Secretary Janet Yellen and Federal Reserve Board Chair Jerome Powell described post-pandemic economic recovery policy.

Ms. Yellen testified that the economic recovery was on the right track, and highlighted two specific points going forward that Treasury plans to focus ongoing forward: (i) continuing to urge Congress to address the debt limit, as the failure to do so would likely lead to a recession, and (ii) encouraging the Senate to pass the Build Back Better legislation currently pending in the Senate, which Treasury expects would increase GDP in the long term.

Mr. Powell testified that, despite a rise in Delta variant COVID-19 cases over the summer, the economy is on a strong recovery path, noting that GDP is on track to increase five percent in 2021 and that 531,000 new jobs were created in the last month. He reported that the Fed expects that inflation will move down in the coming year, as supply and demand imbalances are expected to abate, and that the Fed remains committed to price stability despite rising inflation rates.

In a statement, Committee Chair Sherrod Brown (D-OH) urged the Treasury Secretary and Federal Reserve Board Chair to (i) support the Build Back Better agenda, (ii) demand that corporations lower prices (without lowering wages or laying off employees) and (iii) support the implementation of the bipartisan Infrastructure Act, and the Supply Chain Resiliency Act.

In contrast, Committee Ranking Member Pat Toomey (R-PA) warned of the current dangers facing the economy, including inflation at a 31-year high, and errant policies such as the Fed continuing to buy back bonds despite low interest rates. Mr. Toomey called for Treasury and the Fed to change their course of action, and for the two institutions to curb their emergency-use efforts toward economic recovery.

Commentary

Notwithstanding that the hearing was technically a review of CARES Act programs, the hearing was very much focused on further economic recovery and worries of inflationary pressures. While Chair Powell did note that inflationary pressures are expected to decline as supply and demand imbalances abate, he did acknowledge "that factors pushing inflation upward will linger well into next year."

Primary Sources

1. U.S. Senate Banking Committee Hearing: CARES Act Oversight of Treasury and the Federal Reserve - Building a Resilient Economy

2. Congressional Testimony, Janet Yellen: CARES Act Oversight of Treasury and the Federal Reserve - Building a Resilient Economy

3. Congressional Testimony, Jerome Powell: CARES Act Oversight of Treasury and the Federal Reserve - Building a Resilient Economy

4. Congressional Testimony, Sherrod Brown: CARES Act Oversight of Treasury and the Federal Reserve - Building a Resilient Economy

5. Congressional Testimony, Pat Toomey: CARES Act Oversight of Treasury and the Federal Reserve - Building a Resilient Economy