Federal Reserve Official Urges U.S. To ‘Lock Down Really Hard’ To Save Economy

Minneapolis Federal Reserve president Neel Kashkari visits FOX Studios on February 17, 2016 in New York City.
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Neel Kashkari appeared on CBS’s Face the Nation Sunday, and he suggested that the United States needs to undergo a full lockdown to save the economy. Kashkari is the president of the Minneapolis Federal Reserve Bank, and he said that if the country does not control the spread of COVID-19, any economic recovery will slow or come in starts and stops.

“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,” he said.

Kashkari predicted that without a firm lockdown to isolate the virus, the whole country will experience local shutdowns over the next couple of years, which will have a more prolonged impact and hinder restoration efforts.

“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,” Kashkari said.

Neel Kashkari, interim Assistant Treasury Secretary for Financial Stability and Assistant Secretary for International Affairs, participates in a House Financial Services Committee hearing on Capitol Hill December 10, 2008 in Washington, DC. The committee is hearing testimony on concerns regarding the Treasury Departments oversight regarding the troubled assets relief program (TARP).
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The Fed official pointed to the relative success the northeastern states have had in keeping viral spread contained after waiting longer to reopen than many of the states experiencing trouble across the Midwest. He also pointed out that without a lockdown to bring things under control, more businesses will end up having to declare bankruptcy, and it will take years to rebuild them once things begin to get better. Such a situation will also lead to fewer jobs available to reengage the unemployed in the workforce.

As for Congress, Kashkari urged it to support both the people and the economy, and he said that as long as things recover, then the U.S. can repay its debt. Although Republicans want to reduce the supplemental federal unemployment of $600 a week to $200 a week, Kashkari said that he had not seen any evidence from the data that the increased amount is keeping employees from returning to work on a large scale. He pointed out that right now, with such a high unemployment rate that has left millions of people searching for work, there are too few jobs for everybody who needs one. The only way the additional funding would become a disincentive to work would be when unemployment rates fell to about 5 percent.

President Trump has not given any indication that he would support the type of hard shutdown that Kashkari suggested. In June, Trump said that the country would not shut again, Reuters reported.