One day after Minnesota moved to further ease restrictions imposed in response to COVID-19, two Minnesota thought leaders had gloomy news for what is yet to come from the pandemic.
Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis, said the recovery will take longer — and the economic pain will be more severe — than even he had thought two months ago.
“Unfortunately there is so much that we don’t know right now,” Kashkari 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.”
And Michael Osterholm, the director of the Center for Infectious Disease Research and Policy at the University of Minnesota, said he expects the virus to continue to infect Americans until either a vaccine is developed and widely available or until more than 60 percent of Americans have been exposed. Neither of which will happen soon, he said.
“So when you think about the pain, the suffering, the death, the economic disruption we’ve had to date for 5-to-15 percent (infection) 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.”
The pair appeared as part of a video-conference panel sponsored by the Economic Club of Minnesota. The discussion was moderated by CBS “Face The Nation” host Margaret Brennan.
Kashkari said the latest national unemployment figures are “very troubling” but do not adequately reflect the problem. While the official numbers show a 14.7 percent unemployment rate in the U.S., he thinks that doesn’t count those not looking for work — or those furloughed with fleeting hopes of being recalled to work.
The real number, Kashkari said, was more likely 24 to 25 percent. That means there is less of a chance for what economists term a V-shaped recession — one that goes down quick but also recovers quickly — than there is for a “swoosh”-shaped one with a severe decline and a slow recovery.
Echoing comments Federal Reserve Chair Jerome Powell made Wednesday, Kashkari thinks Congress must continue to help Americans get through the recession. While he supports the paycheck protection program that gave money to smaller employers to keep workers on payrolls, he thinks future infusions of money need to go directly to families.
“People have to pay rent,” he said. “People have mortgages.”
Failure to pay not only affects those families, but it hurts the communities …. 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.”
The first congressional stimulus was made expecting the problems would last only a few months, he said, but now that it’s clear that isn’t the case, more help is needed.
The pair also had warnings for states like Minnesota that are beginning to reopen their economies and loosen social restrictions.
Referencing guidelines issued by the U.S. Centers for Disease Control and Prevention, Kashkari noted many states, including Minnesota, are reopening before meeting those standards. “And yet our cases of COVID continue to climb, our cases of hospitalizations continue to climb, our cases of going to the ICU continue to climb and our cases of deaths continue to climb,” he said. “So it’s one thing to have the standards, it’s another thing to actually follow the standards. It doesn’t strike me that most of the country is even following the standards.”
Kashkari said how well the economy bounces back will depend on individuals. “It’s actually not up to the elected leaders whether we reopen, it’s up to all of us whether we feel safe,” he said. “When we feel safe sending my daughter back to daycare or taking my family back to a restaurant or back to a movie theater.
“Ultimately, until we have confidence that the medical professions and the medical infrastructure really has its arm around the virus with a vaccine or massive widespread testing or an effective therapy, it’s hard for me to see going back to normal as we knew it in January or February,” Kashkari said. “That means that unfortunately the economic recovery is going to be more slow.”
Osterholm said that though the virus hits certain populations more aggressively — including the elderly, the obese, those with heart or respiratory conditions — those populations make up 40 percent of Americans. And when it comes to deciding on reopening, people will have to decide on their comfort level between what he described as 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 health care 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.”
Later, he said, “Let me be clear about this, 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.”
He also said people shouldn’t be fooled by reductions or even the disappearance of infections. Every pandemic has had a second wave that strikes after complacency sets in.
“I know people will celebrate that and say, ‘Look, we’ve won,’” Osterholm said. “In fact, that might be mother nature playing the cruelest trick of all. It goes away and then all of a sudden it comes back with a vengeance.”
Neither Osterholm nor Kashkari offered much in the way of good news, though Kashkari said it was his belief that partisans in Congress will again come together on relief efforts.
“The best news I’ve seen is how swiftly both political parties came together and took bold action to support the American people and the American economy,” he said. “That gives me great confidence.”
Osterholm said he is optimistic that an effective vaccine will be developed — and that early tests on macaque monkeys showed that it could be effective, though it is many months away.
But in keeping with the tone of the rest of the the event, even that presented concerns: “Who makes it, where do they make it and who gets it?” he said. “There are eight billion people who are going to want this vaccine overnight. There is no way that with years of production and administration we could do that.”