Janet Yellen, the current Treasury secretary, and Jerome Powell, who succeeded Yellen as Federal Reserve chair during the Trump administration, each stressed in prepared remarks that the economic pain caused by the Covid-19 pandemic would have been worse if not for the quick moves in 2020 by Congress and the Fed.
"While the economic fallout has been real and widespread, the worst was avoided by swift and vigorous action," Powell said in a statement released by the Fed. But he also emphasized that "the recovery is far from complete, so, at the Fed, we will continue to provide the economy the support that it needs for as long as it takes."
Powell and Yellen spoke in front of the House Financial Services Committee Tuesday afternoon, and are both set to testify again before the Senate Banking Committee Wednesday morning.
Stocks, which were flat before the testimony began, fell during the hearing and were broadly lower in late afternoon trading.
The Fed slashed interest rates to zero last March and is widely expected to keep them near those historically low levels until next year — if not longer. The central bank also launched several lending programs for businesses.
That, coupled with the CARES Act from Congress and the Trump administration last year as well as a newly signed $1.9 trillion package signed by President Biden, have helped stabilize the job market and consumer spending.
"The recovery has progressed more quickly than generally expected and looks to be strengthening," Powell said.
Powell noted that the housing market "has more than fully recovered from the downturn" and that consumer spending on goods, business investment and manufacturing production have also picked up noticeably.
But Yellen, who is the first woman to serve as Fed chair as well as the first female Treasury secretary, urged lawmakers to do even more.
"We are meeting at a hopeful moment for the economy — but still a daunting one. While we're seeing signs of recovery, we should be clear-eyed about the hole we're digging out of," Yellen told Congress, according to her prepared remarks.
She noted that "the country is still down nearly 10 million jobs from its pre-pandemic peak" and that there are still "some very deep pockets of pain" in the economy, including millions of people who are behind on mortgage or rent payments and who don't have enough food to eat.
"I looked at data like these, and I worried that the Covid economy was going to keep hurting millions of people now and haunt them long after the health emergency was over," Yellen said.
She added that now that Biden's stimulus plan has been signed into law, she is working to make sure that small businesses in particular get more help fast.
"We have been expediting relief to the areas of greatest need," Yellen said, adding that "small businesses — and especially the smallest small businesses, which are disproportionally owned by women and people of color," were hit hard by the pandemic.
Yellen said Treasury is now working to make sure that Paycheck Protection Program funds reach "millions more microbusinesses and entrepreneurs, especially in rural and low-income areas."
The surge in stimulus spending has also led to some concerns, most notably among more fiscally conservative Republicans, that a rebounding economy will eventually lead to much higher inflation pressures.
Patrick McHenry, a Republican from North Carolina and ranking member of the committee, asked Powell if he was worried about the threat of inflation.
Powell said that there might be some "upward pressure on prices" but that he expected them to be "neither large nor particularly persistent." He said that even if there is a one-time consumer spending surge thanks to stimulus checks, that should not create longer-term inflation.