Fed’s Kashkari advocates six-week economic lockdown to defeat coronavirus

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Neel Kashkari, Chairman of the Minneapolis Federal Reserve, in an interview on February 17, 2016.David Orrell | CNBC

The US economy needs an even tougher shutdown than last time if it is to defeat the coronavirus, said Federal Reserve Chairman of Minneapolis Neel Kashkari.In a Friday New York Times editorial, he wrote with Michael T. Osterholm, professor and director of the Center for Infectious Disease Research and Policy at the University of Minnesota, Kashkari argues the government should issue a shelter-in-place order. . “For everyone but for truly essential workers” for up to six weeks.

The March lockdown, issued as the coronavirus became a pandemic, was not strict enough and led the United States to fall behind other stricter countries when it came to containing Covid-19, have they declared. The result “might make it seem like what we’ve been through so far is just a warm-up to a bigger catastrophe.”

“To be effective, the lockdown must be as complete and strict as possible,” Kashkari and Osterholm wrote. “If we are not prepared to take this step, millions more cases and many more deaths are likely before a vaccine is available. In addition, the economic recovery will be much slower, with many more business failures and high unemployment for the next one. a year or two. ”

During the initial lockdown, shutting down U.S. businesses resulted in the loss of at least 20 million jobs, only about half of which were taken over in the restart. Congress stepped in with bailout funding that swelled the national debt from $ 3 trillion to $ 26.5 trillion, and the Kashkari Fed also expanded its balance sheet by almost $ 3 trillion by lending and selling providing liquidity through various vehicles.

The containment measures also crushed economic activity as a whole, causing GDP to fall 32.9% in the second quarter, calculated over a one-year period.

Kashkari and Osterholm said the efforts were still not strict enough, as the United States still registers 17 new cases per 100,000 people per day, with more than 160,000 deaths attributed to the virus.

“We just gave up on our lockdown efforts to control virus transmission long before the virus got under control,” they wrote.

Despite the economic damage caused during the initial shutdown, including layoffs, thousands of bankrupt businesses, and mental health and education issues, the authors say another lockdown would pave the way for a stronger recovery .

“If we act aggressively, the screening and screening capacity that we have created will support the reopening of the economy as other countries have done, allow children to go back to school and citizens to vote. in person in November. All of this will lead to a stronger and faster economic recovery, pushing people from unemployment to work, ”they said.

“There is no trade-off between health and the economy,” they added. “Both require aggressive control of the virus. History will judge us harshly if we miss this opportunity to save lives and save the economy this time around. “

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