Fed Chair Concurs with Menendez: Mass Layoffs of Frontline Workers, Cuts to Essential Services will Exacerbate COVID-19 Economic Crisis

Fed Chair Concurs with Menendez: Mass Layoffs of Frontline Workers, Cuts to Essential Services will Exacerbate COVID-19 Economic Crisis

State and local governments laid off nearly 1 million workers in April

   

 

WASHINGTON, D.C. – In response to questioning from U.S. Senator Bob Menendez (D-N.J.) during a Senate Banking Committee hearing today Federal Reserve Chairman Jerome Powell said he agreed with Menendez that the nation’s economic crisis and ability to recover will be greatly impacted if state and local governments are forced to gut essential services and lay off critical workers due to massive revenue shortfalls.  

Yesterday, Sen. Menendez introduced the bipartisan SMART Fund that would help states and cities stave off massive layoffs, avoid steep tax hikes and continue providing essential services residents and businesses depend upon.  The bill will help blunt additional economic fallout by providing $500 billion in direct, flexible assistance to state and local governments. 

From the exchange:

Senator Menendez: 

“State and local governments are facing unprecedented budget challenges. We are looking at an enormous wave of budget shortfalls about to crest which will lead to a Devil’s cocktail of devastating layoffs, dangerous cuts to public safety and essential services, and massive local tax increases. Any one of those ingredients alone threatens to make this economic crisis even worse, and the combination of all three is almost unthinkable.

“Chairman Powell, do you agree that our economy will get worse if state and local governments are forced to lay off even more firefighters, police officers, teachers, and emergency health personnel?  …[F]rom an economic situation, doesn’t that make the economic recovery even worse?”

Powell: 

“Essentially yes, Senator and we have the evidence from the global financial crisis and the years afterwards that state and local governments’ layoffs and lack of hiring did weigh on economic growth.”

Further, Sen. Menendez used the opportunity to underscore how his bipartisan SMART Fund legislation would provide the assistance state and local governments need:

“Chairman Powell in a speech last week you said: ‘Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery. This tradeoff is one for our elected representatives…’ The hit to our state, cities, and counties is tremendous and it’s not just specific to my state of New Jersey. Projections released by Moody’s reveal that every state in the nation is already, or will soon face historic budget shortfalls. 

“Like you said, the Fed can’t be expected to solve all our problems. Congress has to take the initiative to provide relief now, before it’s too late. Yesterday, I introduced the SMART Act with a bipartisan list of cosponsors – three Republicans and three Democrats – to provide $500 billion in direct support to our state and local governments.  This is the first bipartisan bill of its kind in the Senate, and is clear proof that supporting the essential workers and first responders that serve our communities is not a partisan issue.”

###