“We are in the equivalent of an economic war,” said Neel Kashkari, president of the Federal Reserve Bank of Minneapolis. “This pandemic will not be over by the end of summer,” warned Dr. Michael Osterholm, the director of the Center for Infectious Disease Research and Policy at the University of Minnesota.
The health and economic experts shared their opinion about the possible effect of the COVID-19 pandemic on the health and economy of the U.S. in a May 7 webinar sponsored by the Economic Club of Minnesota.
Kashkari and Osterholm were joined by CBS “Face the Nation” host Margaret Brennan who moderated the webcast. The experts had dire warnings for the country.
“Money in the pockets of people who have lost their jobs is what we need right now. People have to pay rent. People have mortgages,” explained Kashkari.
Osterholm, who has been one of the national “go to” experts on COVID-19, said he expects the virus to continue to infect Americans until either a vaccine is developed and widely available or until more than 60% of Americans have been exposed. He predicted that neither would happen any time soon.
“So when you think about the pain, the suffering, the death, the economic disruption we’ve had to date for a 5-to-15% [infection rate],” said Osterholm, “and what it’s going to take to get to 60-to-70% percent, you understand why I say we’re just in the second inning,” he said. “We’re not driving this tiger. We’re riding it.”
Osterholm said that this is not going to be over by the end of summer. He also pointed out that a vaccine will not be available for “many months” and that there are concerns about how long it will actually protect from the virus.
The epidemiologist warned that simply having a mask is not protection enough because the cloth mask protects against larger particles but not necessarily aerosols he explained that front line personnel in hospitals are becoming infected because the virus is slipping around the sides of the mask. For this reason he advised that social distancing has to combined with masks.
“Let me be clear about this,” Osterholm continued. “By the time this pandemic has run its course over the months ahead, there won’t be a blue state, there won’t be a red state, there will only be a COVID-colored state.”
Kashkari predicted that the economic recovery will take longer and the pain will be felt much deeper than even he predicted just months ago. “Unfortunately there is so much that we don’t know right now,” he said. “Most of the news that we’ve gotten in the last couple of months has been bad news, unfortunately. It’s hard to call the bottom.”
Kashkari said the latest national unemployment figures are “very troubling” but do not adequately reflect the problem. These figures show that 36.5 million people have filed claims for unemployment benefits since mid-March.
April’s unemployment rate was officially 14.7%, but Kashkari views the numbers as an undercount, because millions of workers who were laid off were not able to look for a new job—in many cases there were no new jobs available. Those counted as unemployed are only counted as such if they are actively seeking employment. State lockdowns have prevented workers from seeking new jobs because they were forced to stay home.
Kashkari said the true unemployment numbers are closer to 25%. What that means according to the economist is that there is less chance for what economists term a V-shaped recession—one that goes down quickly but also recovers quickly—than there is for a “swoosh-shaped” one with a severe decline and a slow recovery.
According to Kashkari, Congress has to help Americans get through the recession. He said the Paycheck Protection Program that gave money to smaller employers to keep workers on payrolls was a step in the right direction, but he recommended that future infusions of money should go directly to families.
Failure to do so not only affects those families, he said, but it hurts the communities as well. Putting money directly in the hands of laid-off Americans is the most direct way to get assistance. They will use the money where it is needed.
“I personally feel like Congress has a little bit of time, because those extra unemployment checks are still out there,” he said. “But we can’t let there be a gap.”
Kashkari warned that when the billions of dollars given to small businesses as part of the Paycheck Protection Program runs out, there could be a wave of bankruptcies that depletes U.S. productive capacity and slows recovery even further.
Osterholm said that the decision about reopening the country rests on what he calls two guardrails. “The one guardrail is we can’t shut down our economy, our world as we know it, for 18 months if that’s what it’s going to take,” he said. “That will destroy society, not just an economy. We can’t at the same time let this virus go willy-nilly at an unlimited level and bring down our healthcare system.
“That’s the discussion we’ve not had,” Osterholm said. “We’re far too caught up in partisan bickering and sound bites and press conferences when we need to be having discussions just like this.”
