Top Federal Reserve official says US needs another lockdown to save economy

The government should again impose strict coronavirus-related lockdowns for a month or longer across the U.S. in order to boost the economy, a top Federal Reserve official said Sunday. 

Neel Kashkari, president of the Minneapolis Federal Reserve Bank, said the nation needs to control the spread of the virus, which is increasing across much of the country, to get back on a path to economic health. 

“That’s the only way we’re really going to have a real robust economic recovery. Otherwise, we’re going to have flare-ups, lockdowns and a very halting recovery with many more job losses and many more bankruptcies for an extended period of time unfortunately,” Kashkari said on CBS’s “Face the Nation.” 

To do so, he suggested strict shutdowns, which is contrary to what President Trump and many of his allies have been pushing in recent months as measures to aid the economy. 

“I mean if we were to lock down really hard, I know I hate to even suggest it, people will be frustrated by it, but if we were to lock down hard for a month or six weeks, we could get the case count down so that our testing and our contact tracing was actually enough to control it the way that it’s happening in the Northeast right now,” Kashkari said. “They had a rocky start, but they’re doing a pretty good job right now.”

NEWS: @neelkashkari says if the U.S. were able to lockdown for a month or 6 weeks “we could get the case count down” so testing was adequate to control #covid19 or risk permanent economic scarring and dent the recovery. pic.twitter.com/MAUIisokGG

— Face The Nation (@FaceTheNation) August 2, 2020

He warned the virus will spread throughout the country with flare-ups and local lockdowns for the “the next year or two,” causing more businesses to fail, without such measures. 

“We’re going to see many, many more business bankruptcies, small businesses, big businesses, and that’s going to take a lot of time to recover from to rebuild those businesses and then to bring workers back in and re-engage them in the workforce. That’s going to be a much slower recovery for all of us,” Kashkari said. 

He also said that Congress can afford large sums for coronavirus relief efforts, though Republican lawmakers are looking to lessen the amount of supplemental aid for unemployed Americans as part of the next relief bill. 

“Right now, the U.S. can fund itself at very, very low rates. Congress should use this opportunity to support the American people and the American economy. I’m not worried about it,” he said. “If we get the economy growing, we will be able to pay off the debt.”

Kashkari also said he does not see evidence to support claims made by Republicans and Trump administration officials that the $600 federal increase to unemployment benefits is discouraging Americans from getting back to work. 

“There’s just so many fewer jobs than there are workers available,” he said. “At some point, it’ll be an issue. When we get the unemployment rate eventually back down to 5 percent, and we want to get it back down to 4 percent or 3 1/2, where it was before, yes, that disincentive to work becomes material. But right now, it’s simply not a factor in the macro-economy that we have in the U.S. because we have so many millions of Americans out of work.”