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The U.S. economic crisis is even worse than it appears. Here’s what government can do

A new jobs report details a picture of devastating national unemployment not seen since the Great Depression. Neel Kashkari, president of the Federal Reserve Bank of Minneapolis and former assistant secretary of the treasury, joins Judy Woodruff to discuss why the crisis is likely even worse than it appears, who is hurt the most and what the government can do to try to stabilize the U.S. economy.

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  • Judy Woodruff:

    As we have heard, today's jobs report fills in a picture of devastating unemployment nationwide not seen since the Great Depression.

    Let's look at its findings and the challenges of getting the economy up and running again.

    Neel Kashkari is the president of the Federal Reserve Bank of Minneapolis. He was assistant secretary of the Treasury in 2008 and 2009, where he oversaw a major part of the government's efforts to stabilize the system during the 2008 financial crisis at that time.

    Neel Kashkari, welcome to the "NewsHour."

    What words can you use to describe what's going on right now with our economy and what's happened to people's livelihoods?

  • Neel Kashkari:

    Well, it's devastating, just as you said.

    The official unemployment rate is about 14.7 percent, but if you dig below the numbers, I think it's really around 22 percent or 23 percent, when you consider the tens of millions who have lost their jobs.

    And by the way, that data is now a couple weeks' old. It's probably even higher than that. A couple months ago, I was optimistic, I was hopeful that maybe we'd have a V-shaped recovery, shut things down, clamp down on the virus, and then have a quick recovery.

    What we have learned in the last couple months is that the virus is continuing to spread. Tragically, many people are getting it and other people are dying. I think we're in for, unfortunately, a slow, long recovery, rather than an immediate bounce-back.

  • Judy Woodruff:

    Well, I want to ask you why you believe that, because, just this morning, we heard President Trump say — and I'm quoting — "Those jobs will all be back. They will be back very soon, and, next year, we're going to have a phenomenal year."

  • Neel Kashkari:

    Well, as your — Governor Cuomo mentioned in your reporting, that we look around the world, and in other countries where the virus is still spreading, when they relax the controls, they relax the social distancing, it tends to flare back up again.

    Remember, this virus came to America when one person had it, and we didn't know it, and it ended up spreading through society. So it can spread again.

    When we study past pandemics around the world and here at home, if you look at the flu pandemic of 1918, it came in the spring. It created a lot of havoc in the spring, and then it went quiet over the summer. People thought the worst was behind us, and then it flared back up again, and the devastating damage was done in the fall.

    Obviously, we have to avoid that. We know the end point of this is a vaccine or a therapy. But the health experts say that's probably a year or two away. So we have to learn how to live with this virus, reopen in a smart manner, while preserving health and safety.

    But that means a muted, a more gradual recovery.

  • Judy Woodruff:

    I read one economist said today there is no safe place in the job market today, no place that's safe from job cuts.

    Do you think that's correct?

  • Neel Kashkari:

    I think that's correct.

    But we know that these — unfortunately, what's so tragic about this crisis is, it's disproportionately falling on service workers, lower-income, lower-wage and lower-skilled service worker. So women are being affected more than men with the jobs cuts. Minorities are being affected and the less educated are being more affected.

    So the people who can least afford to have them incomes get hammered are the ones who are disproportionately being affected by this. And that's what's tragic about this.

    And the good news is, Congress is acting very aggressively. The Federal Reserve is acting very aggressively. I think the U.S. government is fully going to stand behind our economy. But, unfortunately, there's nothing they can really do to speed this up. It's going to take time.

  • Judy Woodruff:

    And I want to ask you about that.

    But, just quickly, when you talk about the unfairness of how this is hitting people at the lower end of the economic scale, does that mean it's going to be harder to come out of this?

  • Neel Kashkari:

    It is.

    In many cases, those workers were the last ones to recover from the 2008 crisis. So we were just — after 10 years, we were just beginning to finally rebuild our labor market and put all Americans back to work. And the lower-income workers were finally starting to see wage gains. And here comes this virus and just targets them, frankly, and hammers them.

    And that's what's so unfortunate about this and why we really have to do everything we can to get them the assistance that they need, until the health care system can catch up and get control of the virus.

    Ultimately, solving the virus is what's going to solve our economy.

  • Judy Woodruff:

    And that's what I want to ask you about, Neel Kashkari.

    What is it going to take? I mean, how much more money is it going to require the federal government to provide for the American people for them to get through this?

  • Neel Kashkari:

    Well, I — first of all, we have to spend whatever it takes to support vaccine development and therapy development and widespread testing.

    Any dollar we spend there is going to more than pay for itself in needing less money to support the economy. So, that's the first part.

    The second part is, I think we need to start reopening businesses where you can actually socially distance, where you can wear masks. Some businesses lend themselves to that. Other businesses, like a movie theater, simply don't.

    And then I think we start to focus the economic assistance on those workers and those folks that need to socially isolate indefinitely. But we know that younger workers are at lower risk than older workers and those with preexisting conditions.

    I think, if we start to shift towards targeting the assistance to those who are most vulnerable, I think we will be able to get into a place where we can sustain this for a year or two, because we're going to need to be able to sustain it for a year or two.

  • Judy Woodruff:

    But are you saying the government basically has — the government's pockets are full — are empty — or don't have a bottom, in so many words, so that the government can do what's necessary for people who are going to have no income or very little income for a long time to come?

  • Neel Kashkari:

    I think our chairman of the Federal Reserve talked about the great fiscal power of the United States of America. I think that's right.

    I think the government has the resources to support the economy through this period and to get through it. And the more we can focus it on those who need the most assistance, the longer we will be able to do it. But then, of course, we have to defeat the virus. And that is in our health care system. That is a vaccine. That is a therapy to get this behind us and then to get the economy back on its own two legs, so to speak.

  • Judy Woodruff:

    Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, thank you so much for joining us.

  • Neel Kashkari:

    Thank you for having me.

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