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The Coronavirus Policy Wave: When Will The Bill Come Due?

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AllianceBernstein (AB)


  • The coronavirus forced the Federal Reserve and lawmakers to take desperately needed measures.
  • The US economy will eventually recover, but the effects of these drastic policy decisions will be felt for a long time.
  • The Fed's balance sheet isn't the only thing growing: the US government's debt load will expand, too.

By Eric Winograd

The onslaught of the coronavirus forced the Federal Reserve and lawmakers to take desperately needed measures. The US economy will eventually recover, but the effects of these drastic policy decisions will be felt for a long time.

Since the onset of the COVID-19 crisis, both the Federal Reserve and fiscal policymakers have rolled out unprecedented measures to support the financial system and US economy, including the $2 trillion CARES Act passed in late March and the Fed's use of broad fiscal-like powers.

Necessary Policy Moves… but with a Cost

These moves had to happen, in our view, and so will more moves to come in the next few weeks. The swift and expansive action is helping ease the human cost of the crisis, including reinforcement of a strained healthcare system, help for people who have lost their jobs, aid for struggling companies and support to keep financial markets functioning.

All of these measures ease the pain and lay the groundwork for an eventual recovery. But the benefits of these massive programs don't come without cost, and the bill will ultimately come due. While some of the policy responses are temporary and will be reversed in time, other components will be long-lasting, with a profound influence on the US economy and markets for years to come.

The Fed's Balance Sheet Likely to Double by Year End

The Fed has operated through two channels in this crisis. We've paid the most attention to the liquidity channel - a veritable alphabet soup of programs to keep markets from freezing up. But those temporary liquidity programs have been accompanied by a massive-and long-lasting-expansion of the Fed's balance sheet through buying Treasury and mortgage-backed securities.

This latest version of quantitative easing is open-ended and all but certain to be bigger than those

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Comments (3)

Neanderthal_Philosopher profile picture
When will the bill come due?

Who prints the bills and distributes them to you so that you have them in your pocket?

The FED and the Treasury will print and create all the money they wish to create their desired outcome. That is the answer to your query. They can’t create gold. Matters nothing.
I agree higher taxes are coming. It’ll be taxes on wages although I wouldn’t be surprised if capital gains and dividends became more of a tiered tax structure.
The effect will be you’ll be trapped in a certain economic class. Go, get an education, work hard....then pay a huge marginal rate and never build up a decent amount of equity.
Now the current billionaires and those with hundreds of millions. Not a problem. Sit on untapped capital gains, move money over borders, just straight up move. Wait it out for a president or two till they do a one time or permanent drop in taxes (like the repatriation holiday) helped by political greasing. Rinse and repeat. This is why buffet is calling for higher taxes that he won’t pay. Cause he knows he can avoid it while allowing the W2 dumbasses to foot the bill to keep the poor complacent. Winning.
Maaaaaybe we should have been printing endless money when the economy was doing well. Maaaaybe we shouldn't have granted massive tax cuts to multinational corporations that for years did everything in their power to avoid paying taxes in the first place. Maaaybe those same companies shouldnt have wasted trillions of those tax cuts on stock buy backs that vanished in the blink of an eye and instead should have built up a positive balance sheet to weather a storm so they dont require publically funded bailouts.
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