People wait for a distribution of masks and food in the Harlem neighborhood of New York, US, April 18, 2020. [Photo/Agencies]
WASHINGTON -- Former US Federal Reserve chiefs Ben Bernanke and Janet Yellen on Friday urged Congress to pass another COVID-19 relief bill as the pace of US economic recovery could be slow and uneven.
At a hearing before the House Select Subcommittee on the Coronavirus Crisis, the two former Fed chiefs warned that the United States could face deep, permanent economic damage without further relief packages.
They suggested that the next COVID-19 relief bill should focus on three areas: increasing spending on public health, extending enhanced unemployment benefits, and providing further aid to state and local governments.
"Money spent on public health yields a very high return and it means that the economy can get back on its feet more rapidly. We can reopen and put people back to work and of course we also save lives in the process," Yellen said at the hearing.
Yellen added that "it would be a catastrophe" not to extend the enhanced weekly unemployment insurance of 600 US dollars, which is set to expire at the end of this month.
"The unemployment insurance has a humanitarian aspect. We want people to be able to pay their bills and to stay in their homes," echoed Bernanke, adding that the unemployment insurance will also increase aggregate demand and help the economy generally.
Asked about the potential impact of capping the next COVID-19 relief package at 1 trillion dollars, Yellen said, "I would be concerned about capping it when we know that the needs of the state and local governments alone come close to that and a substantial amount will also be needed for unemployment insurance and for public health needs."
Last month, Bernanke, Yellen and another 100 economists urged US Congress to immediately pass a "multifaceted relief bill of a magnitude commensurate with the challenges our economy faces" as the COVID-19 fallout continued to ripple through the country.
U.S. output is expected to contract by an annualized rate of 37 percent in the second quarter and by 6.6 percent for 2020 as a whole, the International Monetary Fund (IMF) staff said on Friday, after concluding an annual Article IV review of the US economy.
"The principal risk, and one that is the most difficult to quantify, is that a resurgence in the number of COVID-19 cases in the US could lead to renewed, partial shutdowns in order to preserve lives, particularly of vulnerable populations," they said.