A member of the Federal Reserve’s rate-setting Federal Open Market Committee said on Sunday that the only way to secure a robust economic recovery is to lock down the country again and reopen with a focus on testing and tracing.
The current path, which has state and local governments dealing with the virus in a patchwork fashion, will suppress economic growth for a year or more and lead to an increase in bankruptcies, according to Neal Kashkari, president of the Federal Reserve Bank of Minneapolis, who appeared on CBS’ Face the Nation.
“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. “That’s the only way we’re really going to have a real robust economic recovery.”
The U.S. death toll from COVID-19 passed 155,000 on Monday, according to Johns Hopkins University data. The U.S. has 4.7 million confirmed cases of the virus, about half of them occurring during July. The number of cases in America is almost double the number in Brazil, the country with the next highest number of infections.
U.S. GDP contracted a record 32.9% in the second quarter, the Commerce Department said on Thursday, while a separate report showed jobless claims rising for the second consecutive week as the COVID-19 pandemic worsened.
Without a national strategy to suppress the virus, fear of getting sick will keep many Americans at home – even without a lockdown – and keep them from engaging in consumer spending, which accounts for about 70% of U.S. GDP, Kashkari said. Sluggish growth will keep unemployment elevated “for the next year or two,” he said.
“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,” Kashkari said. “That’s going to be a much slower recovery for all of us.”