Dallas Fed chief backs additional economic stimulus

The head of the Federal Reserve Bank of Dallas says federal stimulus funds have softened the impact of the pandemic-induced recession, but if additional aid doesn’t come soon, the fragile economic recovery may weaken or stall out.

Robert Kaplan, president and chief executive of the Dallas Fed, also said in an online forum Wednesday that wearing masks and following health protocols are the most important things people can do to both slow the virus’ spread and to help the economy.

The federal government’s early and sizable economic relief strengthened household income and consumer spending, the Dallas Fed chief told those participating in the forum held by the San Antonio Chamber of Commerce.

“Normally, when you have a severe (economic) downturn,

they would drop,” he said. Other countries have had a more severe economic contraction because they didn’t receive the monetary response the United States saw.

But he warned that “if we don’t get some extension of fiscal relief, you might actually see household income and consumer spending get weaker,” he said. “And, you may get a different type of recovery.”

Kaplan said the nation needs to get through the pandemic before leaders start worrying about the federal deficit and spending.

“My guess is we’re going to be socially distancing and wearing masks for all of 2021 because … we’re going to have to see how effective the vaccine is,” Kaplan said. “But when we get out to 2022 to 2023, a lot of the depressed industries you’re seeing today are going to have some rebound.”

He said the country’s secondquarter GDP fell about 32 percent, but then it bounced back 30 percent in the third quarter.

The rebound could have been even stronger if the virus hadn’t spiked during that period, he said.

The Dallas Fed currently expects 5 to 10 percent growth for the fourth quarter, which means an overall decline for the year of

about 2 percent.

By contrast, Mexico’s GDP is expected to shrink nearly 9 percent this year because the country didn’t have an equivalent fiscal response, Kaplan said. The impact on Mexico’s economy likely will hurt Texas’ border towns.

The Dallas Fed chief also noted the pandemic has disproportionately affected people without college degrees. People with high school educations or less are more likely to be collecting unemployment, especially during the pandemic.

“A lot of the people that have lost their jobs may not have a job to go back to because the business they worked at may not survive or that business … has fewer jobs,” he said.

The pandemic has reinforced the importance of investing in workforce retraining, early childhood literacy and improving secondary education, Kaplan said. Access to the internet is another critical part of keeping the economy going.

“On our local ballot in November here, we have an sales tax that we want to use for four years of job training to upskill people,” chamber President Richard Perez said during the forum.

There’s also a proposal to renew a sales tax on the ballot to continue funding for the city’s prekindergarten program, Pre-k for SA.