Is the Fed from Venus and the Treasury from Mars?

The battle between U.S. Treasury Secretary Steve Mnuchin and Federal Reserve chairman Jerome Powell was in full view last week as the two testified before Congress. The two offered different visions about the U.S. economic outlook, with the Administration—facing an election in a few months—offering a more upbeat view of a “V”-shaped recover, unsurprisingly.

Basically, the Treasury offered a more hesitant approach to new federal aid while Powell again suggested that more relief would be needed, given his much less sanguine view of how long it will take the country to emerge from the coronavirus induced shutdown. This too should be no surprise, as the Fed can effectively print money while the Treasury has to go out and raise it and then convince the taxpayers to pay for it. For example, the Treasury seeks to borrow $3 trillion in the second quarter to help finance the aid that Congress has passed.

These differences reflect the Administration’s belief (which I agree) that the biggest danger to the economy is waiting too long to restart activity after two months in which millions of Americans have sheltered in their homes to slow the spread of infections and many millions have lost their jobs. The President has s...

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