WASHINGTON (Reuters) – The U.S. economy could gain advantages if the country shuts down abruptly for four to six weeks, a senior Federal Reserve official said Sunday, adding that Congress could very well significantly significantly significantly add giants of cash for the coronavirus relief efforts.
The economy, which at this time suffered its biggest blow since the Great Depression, could mount a forged recovery, but only if the virus is controlled, Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, told CBS “Face the Nation.”
“If we don’t and this virus spreads across the country with local outbreaks and blockades for a year or two, which is possible, we’ll see a lot more corporate bankruptcies,” Kashkari said.
“This will be a slower recovery for all of us.”
He said Congress is in a position to spend a lot on coronavirus relief efforts, because the country’s budget deficit can be financed without relying on external borrowing, given the savings made through Americans.
“Those of us who are lucky enough to keep having our jobs, we save a lot more money because we don’t move on to restaurants, videos or holidays,” Kashkari said.
“It really means that we have a lot more resources as a country for those who have been fired,” he said.
The Democratic-led U.S. House of Representatives passed a $3 trillion relief bill in May, while Senate Republicans, many of whom expressed considerations about emerging debt, responded by proposing a $1 trillion aid program last week.
Efforts to reach compromise appear to have stalled.
In an interview with ABC on Sunday, Treasury Secretary Steven Mnuchin said President Donald Trump would spend what was necessary, but that the deficit would be a factor.
“Obviously there is a need for staff and economy,” he said. “On the other hand, we will have to be careful not to collect massive debts for generations in the long term.”
Kashkari took a different view, pointing to the highest point of domestic savings and traditionally low interest rates.
“I’m not worried about that, ” he said. “Congress deserves to seize this opportunity for other Americans and the American economy.”
“If we grow the economy, we will pay off the debt,” Kashkari added.
Reporting through Tim Ahmann; Edited by Steve Orlofsky, Daniel Wallis and Dan Grebler
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