Minneapolis Fed Reserve President Neel Kashkari said that the country’s economy needs an even more rigorous shutdown than the last time to combat the coronavirus.
On an op-ed post in New York Times Friday, Kashkari, together with Michael T. Osterhim, a professor and Center for Infectious Disease director, argued that the government should release a shelter-in-place order for up to six weeks.
Osterhim and Kashkari agreed that the March’s lockdown was not sufficiently strict and caused the U.S. to fall behind other nations to contain the virus.
“Comprehensive and strict as possible” is what Kashkari and Osterholm wrote for a lockdown to be effective. They wrote that more positive cases and deaths are likely to happen before a vaccine becomes available if people aren’t willing to take such actions.
Moreover, there will be a slower economic recovery with high unemployment and more business failures in the next year. The initial lockdown that shuttered most businesses has left at least 20 million Americans unemployed. Today, only half of those have recovered post-lockdown.
The U.S. Congress has opted to provide rescue funding and has caused the national debt to increase by $3 trillion to $26.5 trillion. Moreover, Kashkari’s Fed has also extended its balance sheet by around $3 trillion by providing and lending liquidity through different vehicles.
The containment efforts also weren’t successful as it crushed significant economic activities bringing the nation’s GDP to 32.9% in the second quarter as calculated over a full year’s period. Osterholm and Kashkari think that the initial lockdown wasn’t strict enough since the U.S. is still having 17 new COVID cases per 100,000 people per day, with more than 160,000 deaths.
Despite the economic damage caused by the initial lockdown, such as thousand failed businesses, education, and mental health issues, Osterholm and Kashkari suggest that another lockdown can pave the way for a more robust recovery.
They believe that if this is done correctly, the testing and contact tracing capacity can support the reopening of the economy, allow students to go back to school, and have the November elections feasible. These will lead to a more robust and faster economic recovery, allowing people to move slowly from unemployment to work.
Kashkari commented a week ago on CBS about implementing a hard lockdown for a month or six weeks. He argued that we could get the number of cases down with sufficient testing and intensive contact tracing.
President Trump has previously insisted on all states to push through with the reopening. He said that the country is “not going back to shutdowns” when asked about Kashkari’s statement.