“The Fed cannot grant money to particular beneficiaries,” Fed Chairman Jerome Powell told reporters during a Dec. 16 press conference. “Elected officials have the power to tax and spend and to make decisions about where we, as a society, should direct our collective resources.”
A spokesperson for the central bank declined to provide further comment.
When it comes to fiscal policy, many economists argue that failure to act on another large round of stimulus could delay the economic recovery just as vaccines are rolled out to the general public.
Millions of people will see their unemployment benefits expire in mid-March if the measures approved by Congress in December are not extended. States and local government, meanwhile, could be forced to further cut their already strained budgets to make up for losses in tax revenue.
“Without more aid they will have to make more cuts, and cut services and that will disproportionately affect lower income families and communities,” said Heidi Shierholz, who served as chief economist for the Labor Department during the Obama administration and is now at the Economic Policy Institute. She said comprehensive aid for state and local governments and additional benefits for the unemployed should be the priority in the next round of measures.
Economists such as Atwater are also sounding the alarm over longer-term consequences of widening income inequality, which has been associated with lower economic growth, higher crime rates and increased social unrest.
“You cannot have a sustainable economy and political system where you have a small population who believe they are invincible and a growing population who feel defeated,” he said. “It’s in capitalism’s best interest to close this gap.”
This article was provided by Bloomberg News.