The U.S. economy is looking at about a year and a half of starts and stops as the new coronavirus spreads and recedes, according to Federal Reserve Bank of Minneapolis President Neel Kashkari.
“We could have these waves of flare-ups, controls, flare-ups and controls until we actually get a therapy or a vaccine,” said Kashkari on “Face the Nation” Sunday on CBS. “I think we should all be focusing on an 18-month strategy for our health care system and our economy.”
Kashkari, who oversaw the Troubled Asset Relief Program during the 2008 financial crisis, is a voting member of the Fed’s policy-setting Federal Open Market Committee.
“We’re looking around the world. As they relax the economic controls, the virus flares back up again,” he added.
Over the past three weeks, close to 17 million people have filed for U.S. unemployment benefits. The Conference Board is forecasting a 5.8% real decline in GDP in the first quarter on an annualized basis followed by 33% annualized contraction in the second quarter.
“This could be a long, hard road that we have ahead of us until we get to either an effective therapy or a vaccine,” he warned. “It’s hard for me to see a V-shaped recovery under that scenario.”
Furthermore, the focus should be on an 18-month strategy — both for the U.S. health care system and the economy. “If it ends up being shorter than that, that’s great,” Kashkari said. “We should prepare for the worst-case scenario.”
Small Businesses, Congress
In terms of support for mom-and-pop enterprises, included in the $2.2 trillion stimulus package, “$350 billion is not going to meet the needs across all the small businesses in America,” Kashkari said. “So it will end up being first come first serve, who end up getting the assistance and who’s left on the sidelines.”