“That money was used by people just to get by,” he said. “The additional stimulus has not been sufficient to make any type of difference for average Americans.”
‘Rusted Plumbing’
To be clear, the fiscal packages passed by Washington have been among the biggest the country has ever seen, and in large part have targeted the nation’s most needy. In coordination with monetary stimulus, they’ve undoubtedly helped scores of Americans remain employed and put food on the table.
Still, the widening economic inequality that’s accompanied those efforts illustrates the limitations of the response, according to critics.
By easing credit conditions via the Fed, lawmakers were able to quickly prop up large corporations and wealthier individuals. But distributing aid to smaller firms and low-income workers has turned out to be a lot more challenging.
Delays in the delivery of assistance, as well as confusion around rules and eligibility criteria, hindered many of those programs.
Of course, it’s no accident that the machinery of monetary policy worked smoothly while the fiscal equivalent sputtered. It’s seen more regular use.
For roughly four decades, U.S. governments have largely delegated management of the business cycle to an independent Fed -- in line with economic orthodoxies of the time, but now coming under increased scrutiny. Fiscal policy, better suited to regulating how the pie gets shared out, fell out of fashion except as a crisis tool. And over that same period, inequality steadily widened.
According to Fischer, the pandemic has shown how the infrastructure the U.S. government could use to reach everyday Americans is broken and in dire need of reform.
“Congress did a pretty good job of getting money to people, but we didn’t manage to fix decades of rusted plumbing,” she said. “The fact that the Fed has infrastructure to do a bond-buying program but not do to anything else is a choice, not an inevitability.”
More Aid
For their part, officials from the Fed have regularly acknowledged that monetary stimulus is far from a panacea, and that the central bank has only limited tools to target specific economic outcomes.