US economy risks 'permanent damage' from long lockdowns, Mnuchin warns
Mnuchin’s comments came in a joint appearance before the Senate banking committee with Jerome Powell, the chairman of the Federal Reserve.
Appearing via video link, the pair offered a stark assessment of the fragile state of the economy and warned of worse to come.
“I think the jobs numbers will be worse before they get better,” Mnuchin said, adding that the overall economy too was likely to weaken in the near term before starting to recover towards the end of the year.
After the hearing the Congressional Budget Office (CBO) released its own bleak outlook for economic growth, predicting a 38% decline in economic growth in the second quarter on an annualized basis.
Congress has already approved a near $3tn package of measures aimed at reducing the impact of a crisis that has led to an unprecedented surge in job losses, and which threatens to push unemployment up to heights unseen since the 1930s Depression.
The Fed has cut interest rates to zero and launched nine lending programs to support businesses, cities, states and financial markets.
Mnuchin and Powell said more action would be needed.
In recent weeks, the Trump administration has tried to move the debate from containment to the need to reopen the economy. The move has been criticized by epidemiologists and other experts who remain concerned the coronavirus is not yet under control.
The Democratic senator Sherrod Brown pressed Mnuchin on the White House’s push to rapidly reopen parts of the economy. “How many workers should give their lives to increase our [gross domestic product] by half a percent?” Brown asked Mnuchin.
Mnuchin replied: “No workers should give their lives to do that, Mr Senator, and I think your characterization is unfair.”
Mnuchin and Powell said economic data from states that are beginning to reopen will be key to determining the next steps in the federal response.
Powell said: “We’re going to see here fairly quickly how the opening goes. It’s very hard to know. We’re going to be getting a lot of information fairly quickly in terms of what might be needed.”
Brown countered that “from what we know so far, it does not appear that this administration or the Federal Reserve are making workers their priority”.
Brown said he wanted to know “not about what you’re doing for big banks or big corporations, and how you expect that money to trickle down, but how you’re making sure the money and authority Congress gave you actually help the people who make this country work?”
Mnuchin acknowledged the “unprecedented challenges the American people are experiencing” and defended the administration’s record.
He said: “President Trump and the entire administration are committed to providing necessary relief to help people get through this time.”