OECD chief warns coronavirus debt will “come back to haunt us’

Organization for Economic Cooperation and Development Secretary-General Angel Gurría on Wednesday warned that the debt countries and companies take on to weather the coronavirus pandemic would be a drag on economies in the future.

The debt, he said, would “come back to haunt us,” according to the Financial Times, which hosted the online conference where Gurría made the remarks.

“We are going to be heavy on the wing because we are trying to fly and we were already carrying a lot of debt and now we are adding more,” Gurría said.

Governments are struggling with how much debt they can take on to keep their economies afloat during lockdowns. Some economists have argued that the move toward austerity in the aftermath of the 2009 financial crisis was too swift, and led to a slow, anemic recovery.

But debt-saddled governments may worry about the prospect of a painful default down the road if their debt becomes unsustainable and their economies falter. A default, or even the prospect of one, can cause its own set of financial concerns and economic pain.

The comments came just hours after Federal Reserve Chairman Jerome Powell came out in favor of deficit spending that could support the economy.

“Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery,” he said Wednesday morning.

Congress has already approved $3.6 trillion worth of measures to combat the virus and keep the economy afloat. Democrats on Tuesday unveiled an additional $3 trillion bill, which would extend and in some cases expand the emergency supports.

The deficit is expected to reach a record high of nearly $4 trillion this year, pushing the overall debt past 100 percent of gross domestic product for the first time since World War II.