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Transcript: Minneapolis Fed's Neel Kashkari calls for more direct assistance for American workers

After a devastating April that saw over 20 million Americans lose their jobs, the U.S. economy continues to see crippling impacts from the global coronavirus pandemic with no end in sight. 

In a conversation with "Face the Nation" moderator Margaret Brennan Federal Reserve Bank of Minneapolis President and CEO Neel Kashkari issued a stark warning for the economic prospects of the United States: we're in for a long road to recovery. 


  • Kashkari says real unemployment figures much higher than projected: " have to actively be looking for work to be counted as unemployed. And we've been telling Americans stay at home. So many people who lost their jobs are staying at home following the advice of health experts. They're not looking for work. They're not counted as unemployed. And many, many others said that they still have a job, but they're on furlough. They're home, they hope only temporarily. Unfortunately, the longer this goes on, the more likely those temporary job losses become permanent job losses. And so I think the real unemployment today is around 24 or 25 percent if you compare where we are today to where we were February, and that's obviously devastating for so much of the country."
  • Kashkari calls for more direct assistance in the form of checks for Americans: "... putting money directly in the hands of laid off Americans is, I think, the most direct way to get assistance. And then they will spend the money where they need it. If they need to use the money on rent or they need to use the money on food, they're in the position to make that call rather than the government saying, well, this much for food or this much for rent. I just think money in the pockets of people who've lost their jobs is what we need right now until we can get the healthcare system to catch up and get control of this virus."
  • Kashkari says it will be a long, hard road to recovery:  "I think a V-shape recovery is off the table...There's some of the temporary furloughs are becoming permanent job losses. And as you see, small businesses, even here in Minneapolis, we've seen restaurants who've already announced we're not reopening. That it's just too hard. We're just going to close up. That's what makes it a much longer, harder recovery."

MARGARET BRENNAN: It is great to have two distinguished co panelists here. And I love being able to moderate this today in our new reality via YouTube and streaming. I wanted to start off with you, Neel Kashkari, because we did get another snapshot of what reality is for so many Americans today. We learned another two- three million have filed for jobless benefits. It's about 36.5 million Americans who have now asked for unemployment help in just the past two months. From where you sit, do you think we're getting an accurate sense of the amount of economic pain and the actual jobless rate?

NEEL KASHKARI: Well, it's good to see you, MARGARET. The unemployment numbers today are obviously very, very troubling. Another three million Americans, as you said, the headline unemployment rate that came out last week said the unemployment rate's 14.7 percent. We know that is understating the true damage because first of all, that's a few weeks old now and 10 million plus have filed for unemployment benefits since that data was taken. And then we know that you have to actively be looking for work to be counted as unemployed. And we've been telling Americans stay at home. So many people who lost their jobs are staying at home following the advice of health experts. They're not looking for work. They're not counted as unemployed. And many, many others said that they still have a job, but they're on furlough. They're home, they hope only temporarily. Unfortunately, the longer this goes on, the more likely those temporary job losses become permanent job losses. And so I think the real unemployment today is around 24 or 25 percent if you compare where we are today to where we were February, and that's obviously devastating for so much of the country.

MARGARET BRENNAN: One of the White House advisers told me just a few days ago he thinks we will trough north of 20 percent possibly by June. Do you agree with that?

NEEL KASHKARI: I think so. I mean, whether- whether it's done by June, I think the key is going to be, as we talk about with- with Mike, how the virus progresses, and do these temporary furloughs become permanent layoffs, and how long does that process take? Unfortunately there's so much that we don't know right now. Most of the news we've gotten in the past couple of months has been bad news, unfortunately. And, you know, it's hard to call the bottom.

MARGARET BRENNAN: Doctor, there- there's a lot of pressure right now on governors and local government to try to reopen the economy to address the pain that we just heard described. From where you sit, do you think we are in an extended plateau of this pandemic? Do you see any reason to believe that it is declining here in the U.S.?

DR. MIKE OSTERHOLM: Well, first of all, MARGARET, thank you for having me. And it's great to be out with Neel, someone who we all on the public health side respect very much for his interface between public health and the economy. Let me just say right from the start we're only in the second inning of a nine inning game. This is a situation that will last for many months. It's not going to be over with- by the beginning of the summer or the end of summer. If you look at pandemics caused by respiratory pathogens, primarily the ones in the influenza world, we know that they will march through the world for months and months until a sufficient number of people are infected and now become immune or until we have a vaccine. We know that vaccines surely would be the perfect answer. But we have to be honest to tell the population out there that as much as you've heard so much about them, it's at least many months off before we have a vaccine. To put this into perspective and to understand, I think, in context what Neel was just discussing, today, we estimate that between five to 20 percent of the U.S. population has been infected with this virus. The 20 percent primarily in the New York City area, the vast majority of the country in the five percent area. For this virus to actually develop what we call herd immunity where enough people have actually been infected and hopefully developed immunity where we can put rods in that virus transmission reaction, we need to get to 60 to 70 percent. So when you think about the pain, the suffering, the death and the economic disruption, we've had to date for five to 15 percent largely and what it's going to take to get to 60 or 70 percent, you can understand why I'm saying we're just in the second inning. And I think that's the perspective that if we don't keep, we will constantly come up short in anything we do in terms of response, whether it's to try to prevent the infections or how we respond to them when they occur or how we respond to the economy.

MARGARET BRENNAN: Just the second inning. There's a lot riding on the idea that there could be a vaccine by 2021. But given that there is no effective vaccine really against MERS or against SARS, why do you think that it is a real possibility one can exist in the near future for COVID-19?

DR. MIKE OSTERHOLM: Well, first of all, when you think of the concept of the vaccine, we obviously come at this from a traditional vaccine standpoint, like childhood immunizations. What we're talking about here is a vaccine that we do have evidence already that people get- develop some immunity or they wouldn't get better. They do survive. But also, we've had several studies done in animals looking at certain kinds of macaque monkeys where they have actually been infected with the virus intentionally and then re-challenged a month or more later in which they actually had full protection against re-challenge. Two different vaccine preparations have actually been put into these same kinds of monkeys and then challenged again and they were also protected. What we're really concerned about is how long is the protection? What is the durability of protection? Is it a few months? Is it a few years? That could have a big impact. The second thing, though, that we have to understand is not only are we looking at how well that it protects, but we're also looking at how safe they are. There's actually some signals that have come forward that they actually could lead to certain kinds of immune diseases themselves if you create just a little bit of antibody with the vaccine and then you actually get infected. So one of the challenges we have in getting a vaccine is making sure it's effective and it's safe and then making it. So you're right, we- we aren't going to have a vaccine soon, but I am least optimistic we have a chance.

MARGARET BRENNAN: Neel, you know, for every parent when they hear about these new infections of things related to coronavirus get very nervous. On the economic side of things, is it possible to reopen the economy if you're not reopening schools and daycare centers?

NEEL KASHKARI: It's a great question, MARGARET. You know, the economic- we've seen models, we've done modelling here, where schools might be a big transmission mechanism of children passing the disease to other children and then reinfecting their parents. But you know how infectious children actually are, it seems as though we know that young people are less vulnerable to the disease than older people, but not necessarily perfectly immune. There are obviously young- some young people who are getting sick or we're hearing this reporting out of New York that there are other diseases that kids may be getting that are related to coronavirus. Ultimately, the notion of reopening the economy, it's up to all of us. It's actually not up to the elected leaders when we reopen. It's up to all of us when we feel safe, when we feel safe sending my daughter back to daycare or taking my family out to a restaurant or back to a movie theater. Ultimately, until we have confidence that the medical professionals and the medical infrastructure really has its arm around the virus with a vaccine or with 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. And that means, unfortunately, the economic recovery is going to be more slow.

MARGARET BRENNAN: So, Doctor, to that point, I mean to the degree someone has a choice as to what- how to, you know, occupy their child with childcare or school, would you advise parents at this point that it is safe by the fall to send their kids to a childcare center or a school?

DR. MIKE OSTERHOLM: Well, first of all, in public health, we virtually never use the word safe. "Safe" is a relative term. 


DR. MIKE OSTERHOLM: We would say this is what we know about the risk. Is your risk greater of having an adverse event getting in the car driving to school today than it is being in school? It's that kind of concept. And so in this case here, we don't have much of the information that we still are gaining and need to have to define the risk for everyone. For example, we know that individuals today who developed this infection are much higher at risk of developing a serious illness and dying if they have one of several different risk factors: being a man, being older, having underlying heart disease, having kidney disease, having certain kinds of histories of blood cancers or lung cancers, and actually being obese, particularly morbidly obese. That's 40 percent of our population today in this country. Ironically, having- being a child younger and otherwise not having a health problem are at the very, very lowest risk, but there are going to be cases that will occur, 20, 30, 40, 50. The question is, what is the risk? Every year in this country, between 80 to 120 children die from influenza. We don't stop school. We don't keep kids from school. But yet they happen. So one of the things we're going to have to do as a society is as  Neel just said, what is our comfort level with all of this? And I would just say that somewhere going to be between two guardrails. The one guardrail is we can't shut down our economy, our world as we know it for 18 months or more if that's what it's going to take. That will destroy a society, not just an economy. We can't at the same time, let this virus go willy nilly and transmit at an unlimited level and bring down our health care system. So the question you're asking is right in the mark of how I talk about threading the rope through the needle. How are we going to make these decisions? How are we going to decide what's safe and not safe, relative to that concept of relative safety? And I think that's the discussion we've not had, and I wish we had. We're far too caught up in- in partisan bickering and in sound bites and press conferences when we need to be having discussions just like this.

NEEL KASHKARI: But, MARGARET, can I follow up for just a second?  


NEEL KASHKARI: Just something that Mike just talked about, which is, I think and Mike correct me, I think it's a key point that we don't know the answer to yet. So one thing is are kids going to be safe going back to daycare or school? So let's hope they are safe. Let's assume that they're safe for a moment. But are they then still able to transmit the virus within their peers and then back to their families? That's a separate, also equally important question. And I don't know, Mike, if we have great insight into that.

DR. MIKE OSTERHOLM: The more data we've collected says that they do get infected and they are infectious. Not any more. Not any less. With the influenza world, we know that kids are highly infectious. They are a little walking viral reactors out there. That's not the case here. But nonetheless, they still are infected and infectious.

MARGARET BRENNAN: And, Doctor, what difference does it make if masks are worn? Does it change that calculus?

DR. MIKE OSTERHOLM: Well, this is a real challenge for us because it's as much an emotional issue as it is a science issue. We have increasing data today to support that this virus is transmitted in a very big way by aerosols. You and I are just talking right now in these respective rooms. We are filling this room with aerosols. In fact, there's a paper just published today that actually really shows that very clearly. These are the tiny little things that you see. Next time you see the light coming through the window in your home and you see all that dust floating, you say, oh, my, I have a very dusty house. Those are actually aerosols. And so the problem is, is the masks we need to stop aerosols are actually what we call the N95 respirators. They're not only a material that can block the virus coming through, but they're also tight face fitting, so there's no leaks. The surgical mask and the cloth mask we have today will surely stop you from getting big particles into your face or potentially you excreting them, but they don't stop the aerosols. And one of the things that we're looking at right now very carefully is the increased number of health care workers in this country and around the world who have been infected and in many cases severely impacted by this. And we believe that's because they've been wearing surgical masks and that the virus is basically going right around the sides of these open gaps in the mask. They're not coming through the material. And then, in fact, are infecting them potentially with large volumes of virus in these hospitals. And so I think it's important that we not count on the masks to be the final protection. It's going to be distancing. I would never tell someone not to wear a mask. But at the same time, I would not want to promise something that I don't think is- is very true. And I will just close by one last comment about that. Very recently, I had a substantial debate with a colleague of mine who insisted no, that aerosols were not important, and he only wore his surgical mask. He went to the grocery store 3 times over the course of the last six weeks. That was his primary outing. Today, he's in a hospital in- in serious condition with COVID-19 infection, and he, in his public setting, wore his mask. So I think we have to be mindful of what we're telling people and say that it may help, but unless you have an N95 respirator, I wouldn't count on it. 

MARGARET BRENNAN: Do you wear a mask? 

DR. MIKE OSTERHOLM: I don't wear a mask in terms of where I'm at because I'm pretty much sequestered most of the time.


DR. MIKE OSTERHOLM: And- I have done everything to isolate myself from- from public exposure.

MARGARET BRENNAN: Neel, I mean, as an economist, I have to imagine it's pretty frustrating to not be able to look at any kind of uniform data set and the- the doctor just raised another sort of question in what is reliable in terms of even just one of the things some governors have- have ordered their residents to do, which is to wear masks in public. From where you sit, would it be better public policy if there were uniform guidelines across the board so that each state was going by the same set of rules and that it would allow for some kind of uniformity in data collection?

NEEL KASHKARI: I think so. I mean, I think with the best expertise that we have available, you know, this is like we're in the equivalent of an economic war or a health war. 
And in your world, oftentimes, I think you don't have the luxury of the data that you'd like to have, and you have to make decisions with the data that you have. And I think more standardization, I think, would help. One example, the White House a few weeks ago put out guidelines to reopen different states if they can see certain thresholds. I compared those guidelines to what I hear from Dr. Osterholm and other health experts, and it seemed very sensible based on the state of the science and the knowledge today. You know, but states are reopening not meeting the guidelines that the White House has set. Here in Minnesota, we're relaxing our social distancing, we're reopening our economy, and yet our cases of COVID continue to climb. Our cases of hospitalizations continue to climb. Our cases going to the ICU continue to climb. And our cases of deaths continue to climb. So one thing is to have the standards. Another thing is to actually follow the standards the CDC has put forward.

MARGARET BRENNAN: Well, that's incredibly frustrating, I'm sure. I mean, for, that the data set that you are seeing, you know, one of the things that the Federal Reserve chairman said yesterday that certainly was stunning to me was that point he made that 40 percent of households making less than $40,000 a year lost a job in March. 

I mean, it just underscoring again and again that the most vulnerable during this time period when we can socially distance to have this conversation, a lot of people can't if they even have a job still. What can be done to offset this immediate pain?  Is there anything the Fed can do for those individuals or is that entirely in the hands of Congress?

NEEL KASHKARI: Unfortunately, it's in the hands of Congress. As the chairman said yesterday, we have the ability to lend. We can provide loans to financial markets. We can actually- what Congress- and I applaud them for how bold they've already been is granting money, either kept- sending checks to American families or grants to small businesses to help them make ends meet. They're going to need more. This is a- a slow recovery the way I think it is. I think we're in this for months, a year, 18 months. There are going to be a lot of families that are gonna need direct financial assistance, extended unemployment benefits, things like that, just to help them put food on the table and make ends meet. And I'm hopeful, given how Republicans and Democrats have come together so aggressively thus far, I'm hopeful they'll do it again and continue to provide support to American workers.

MARGARET BRENNAN: I know you don't want to be overly prescriptive. But, I mean, just looking at what we know, I mean, food prices for staples, eggs, milk, things like that, that people need to put that food on the table, those- we saw the largest one month spike in close to 50 years last month. [00:01:54] So it's getting harder, and it's getting more expensive. So when you're saying something needs to be done, are you talking about things like increased food stamps. Are you talking about more checks straight to those low income Americans? What do you mean?

NEEL KASHKARI: I think either of those, but mostly more checks. I mean people have to pay rent. You know, people have mortgages. And this is- this is directly affecting those families. But it's also going to affect their communities if we end up having waves of foreclosures and waves of bankruptcies because people can't pay rent or can't pay their mortgage, so whatever the assistance. I mean, one of the things I think I've learned in the past two months, I actually supported the Paycheck Protection Program trying to keep small businesses whole. It's not been perfect, but it's put a lot of money out quickly. But putting money directly in the hands of laid off Americans is, I think, the most direct way to get assistance. [00:02:44] And then they will spend the money where they need it. If they need to use the money on rent or they need to use the money on food, they're in the position to make that call rather than the government saying, well, this much for food or this much for rent. I just think money in the pockets of people who've lost their jobs is what we need right now until we can get the healthcare system to catch up and get control of this virus.

MARGARET BRENNAN: So, Doctor, where is the state of this American healthcare system in meeting the needs of those who are most economically vulnerable right now? I mean, does it concern you from what you're seeing that, you know, this seems to be heavily concentrated or or perhaps disproportionately impacting low income Americans, particularly African-Americans and Hispanics? What does that say to you about what getting through this virus looks like?

DR. MIKE OSTERHOLM: This is what the second inning of a nine inning game looks like. Let me just 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 color state. And what happened is early on in this pandemic, when the virus first got here, it was, in a sense, the transmission enhanced by the density of people all being together. Let me give you a case in point. If one in 200 people in a community were infected with this virus, you might not see much activity as such. But let that one person be a long term care employee or a visitor to a long term care facility. Let them be a meat packing pat- processor or or somebody in their family. Let him be somebody in a drug treatment center or a homeless shelter. Let them even be someone in a prison or a guard that goes to work every day in the prison. And once that virus got there, it was like a match in a gas can. Boom. 40, 50, 60 percent of the population were infected. Many people are seeing this outbreak or pandemic from a worldwide perspective as just that. What's going to happen over time is this virus is going to keep transmitting. There are two principles acting here that we cannot deny. One is what I call viral gravity. It is going to keep going until it gets to that 60 or 70 percent level one way or another, either by vaccine or by national infection. The second thing that this virus is going to do basically to us is it's going to continue to not only just transmit, but it's going to make sure that it doesn't miss anybody, meaning that you're going to see more and more people who today don't even know someone who's been infected that will be infected over time. What we don't know for the healthcare system is how we get there. We put out a paper several weeks ago from our center, in which we laid out scenarios, not models. I always have a challenge with models because they're all based on assumptions. We just said, here we are right now at this five to 20 percent level. How do we get to 60 to 70 percent? Well, if this is like an influenza pandemic, every one of them had a major peak six to seven months after the introduction of the virus, meaning that if you look much larger than anything that happened with the first wave like we're seeing now, we could have a situation of like 1918. Everything we've seen to date will be considered minor activity. Imagine telling someone in New York right now you only had minor activity. Remember, in New York, we're talking no more than 20 percent of the population infected. That leaves us with another 40 to 60 percent to be infected. So I think the challenge to the healthcare system is it's going to be that kind of a model where suddenly one day there won't be a healthcare system and anywhere in the world capable of handling that big peak. Or will it be just a slow burn? Will we- as a coronavirus, we don't know will continue to just occur like it is? And hopefully we can stay under what I call the case cliff, where we will fight over- go the capability of providing health care, or will it be a series of peaks and valleys? We don't know. But what we have to understand, whether it's from public health, from medical care resources, from the economy, this is not going to get done soon. And it's going to keep coming back and back and back. I unfortunately promise you, MARGARET, you will be doing a show on FACE THE NATION a year from now on this very issue.

MARGARET BRENNAN: And no doubt we will be tracing the impact for it for years to come. But just I want to understand you fully here. You know, in testimony today before Congress, the whistleblower, Dr. Rick Bright, who ran BARDA, one of the agencies working on vaccines, said that our country could face the darkest winter in modern history. Is that hyperbole? Is that what you're predicting?

DR. MIKE OSTERHOLM: I'm not saying it's going to happen. I'm saying it could happen. We don't know how we're going to get from here to that 60 to 70 percent. If this was like an influenza pandemic, we could very well see cases begin to actually decrease over the course of the next few weeks to months. And I know people will celebrate that and say, look, we've won. In fact, that may be Mother Nature playing the cruelest trick of all by saying, just like it has in every previous influenza pandemic, it goes away and then all of a sudden it comes back with a vengeance. We don't know why. We don't understand it, but it happens. And it has happened at least 10 times in the last 250 years. So I think the challenge we have today is laying out what are the possible scenarios. If I had come on your show six months ago and read you the chapter in my book, it would read just like today, and you would have dismissed me as a crack. You would have said, you know, this isn't going to happen. Now we're here. Now use- continue to use creative imagination to figure out how we're going to get out of this. What's the endgame? And again, that's a possibility. We could see a huge peak that could be devastating beyond anything I could otherwise imagine. We could see it just continue to burn at this level like this for months. But the bottom line it's going to do something. And that's what we need to have a discussion of. How are we preparing now? What are we doing now to get ready for that? And we're not. We're having a debate of whether we should be opening up today or not. Which is not unimportant. If you're one of those unemployed people, it's not unimportant. It's very important. But we need to have a much, much higher level discussion than we're having right now.

MARGARET BRENNAN: Neel, Congress is basically arguing over the timing of trying to do something more on emergency aid, phase four. The White House says they can wait until June. What is the cost of waiting?

NEEL KASHKARI: Well, I think- again, the one the one program that has is working, it's not perfect, but the one program that really does seem to be working is the unemployment system- is getting money out to people who've lost their jobs, by people filing for unemployment claims. And I know there've been some- you know, Florida has its own unique challenges, but for most of the country, the unemployment system is working. Here in Minnesota, it is working. Checks are getting out to people who've lost their jobs. And Congress provided those increased payments, an extra $600 a week, and that's through around July. So to me, when I- looking at the landscape of different things Congress could be doing given how painful this is for families, I think the most important money that is going out is the money that is going right to laid off workers and right to families. So I personally feel like Congress has a little bit of time because those extra unemployment checks are still out there. They're still getting processed through June and through July. But we can't let there be a gap because people have rent that they need to pay. They have mortgages they need to pay. They have food they need to buy. And as you said, MARGARET, in some cases, food prices are going up because there are supply shortages across the country. And so there are a lot of things, I think I have not yet studied the House bill that- they're that they just introduced a couple of days ago. I think it's very complicated. I've understood it. There's a lot in there. But I'm focused on what puts money in the hands of families that are most directly affected. And just as you said, you could not design a virus to more acutely target the most vulnerable and the lowest income Americans. And that's what's so devastatingly unfair about this. And we need to do whatever we can to get help to them because they didn't do anything. This isn't moral hazard. They didn't take some foolish risk. It's just a natural disaster that's unfairly targeting the lowest income part of our population.

MARGARET BRENNAN: And Doctor, what- what is the health care solution for those individuals when there is a vaccine? Do we know anything about how it would be distributed, how widely available it would be?

DR. MIKE OSTERHOLM: Well, one of the real challenges we're going to have is, first of all, doing the research and development to get a vaccine, find that it works, but you have put your finger on a very important issue. And that is how- who makes it, where they make it and who gets it. There are eight billion people who are gonna want this vaccine overnight. There's no way with years of production and administration, we can do that. Even just this morning, one of the French vaccine manufacturers that made note that they were going to make the vaccine for Americans as part of their operation here.


DR. MIKE OSTERHOLM: And as you saw the French government has already responded with some very terse language about what's going to happen.  We don't have a clue right now which country or countries might actually find a vaccine first. It might be the Chinese. It might be here in the US. It might be in Europe. And when that vaccine's available, I don't think it'll be the only one that will come forward. But in fact, it will mean somebody going to have to make choices between who gets it and what country. What are the risk factors? I mean, I'll just give you a case in point. I would tell you right now, if I had to target it to one group in the United States, I would target it to healthcare workers, right now. They are dying, working on the front lines. And yet I can understand the public outcry that we're taking care of our own, even though we can make the case why. And we're not having those discussions right now. We need those. We need to understand at a time when our country is isolating itself from the rest of the world, it's when we should all be having a game plan for the world, by the world and with the world about what we're gonna do with vaccine so that we know middle, low income countries, high income countries. Which countries get it? And that's gonna be important. And let me just add one last thing. We're learning about supply chains. Our group has been writing about this for a long time, about this just-in-time delivery system where much of it's made in China. When we talk about supplies for making vaccines, vials, syringes to deliver them, needles, all those kinds of things, that's not going to happen overnight either. Wouldn't it be a shame if we actually had an effective vaccine that we weren't prepared to deliver or didn't have the equipment to do it? That's the kind of discussion we should be having right now. But instead, we continue to have these one off political debates that have no relevance to any of these activities that we're talking about.

MARGARET BRENNAN: Does this look like a one time vaccination or boosters?

DR. MIKE OSTERHOLM: We don't know. This is going to be one of the questions. Is there durable immunity? When you asked me earlier about SARS and MERS, that's been one of the challenges is that the antibodies may actually wear off over time or the protection that we get from the vaccine. We have many questions yet. We could eventually manage this as a vaccine that's given yearly or every other year, but then realize what that will mean in terms of trying to deliver it for the world. So these are major questions that we have to answer that we don't have any answer at all for right now.

MARGARET BRENNAN: And Neel, I remember talking to you a few weeks ago and you were very clear that any predictions, looking at all these pieces make, you know, a V-shaped recovery, a bounce back next to impossible. Given that each state is somewhat dependent on how aggressive their own governors are or their own mayors are in- in deciding public policy around this. Is this just a sense of, you know, two steps forward, one step- I mean, are we just getting jerked back and forth. Is there a recovery that looks like any kind of letter in the alphabet at this point?

NEEL KASHKARI: You know, I think a V-shape recovery is off the table. 


NEEL KASHKARI: Everything that we've learned in the past few months or in the last few weeks since you and I last spoke, MARGARET, unfortunately, the job losses continue. There's some of the temporary furloughs are becoming permanent job losses. And as you see, small businesses, even here in Minneapolis, we've seen restaurants who've already announced we're not reopening. That it's just too hard. We're just going to close up. That's what makes it a much longer, harder recovery. Just think about the coffee shop or the restaurant that goes out of business. You have a vacant storefront for six months or a year or two until another coffee shop or another restaurant forms, redecorates, hires new people, it just becomes a much slower recovery than simply turning things off and turning things back on the way we hoped was possible a couple of months ago. Again, who is setting the pace of this? Ultimately, it is the virus. And it is the course the virus is going to take, and it is the confidence all of us end up having in going back to whatever the new normal is. Going back to sending our kids to school or daycare or going back to restaurants. I go grocery shopping every couple of weeks. I wear a mask. I socially distance. Boy, Mike's story that he told about one of his colleagues is concerning to me. I hope that my behavior is enough to protect me and to protect my family. But until we have confidence, this recovery is going to be muted. And I don't think there's any way around that.

MARGARET BRENNAN: Has it surprised you that there haven't been more bankruptcies at this point, or are we just- we haven't heard about it yet?

NEEL KASHKARI: I think- I think Congress has moved very aggressively. So, for example, the PPP program put out four or five hundred billion dollars very quickly across the country into small businesses of all shapes and sizes. I think that was a very powerful bridge, but it was designed to be a bridge for two months. And then you go back to normal after two months. I think when that two month expires and when the virus, unfortunately, if it's continuing to progress, then I think you're going to start to see bankruptcy start to emerge at that point when that bridge expires, unless Congress chooses to extend it. But at some point, if what Dr. Osterholm was saying is right that this is an 18 month journey that we're on, at some point, policymakers are going to ask the question, should we just focus on the workers and not go through the- through the business as a channel of getting support?

MARGARET BRENNAN: We also have some of our listeners, the viewers, sending in some questions.  This one is for you, Dr. Osterholm from Stephen, who works with Habitat for Humanity International.  You've stated that approximately 60 percent of the country will be infected with the coronavirus. What percentage of those who get infected will need hospitalization and ICU level care?

DR. MIKE OSTERHOLM: It's going to change as over time relative to the risk groups that are infected. So right now we're infecting a lot of high risk people. Almost a third of all the cases who have died have been of persons living in long term care. So I pointed out earlier, as we burn through those facilities, a very horrible thought, that's going to mean that the numbers of severe illnesses will continue to occur, but they won't occur necessarily at that rate. So at this point, if you just did a kind of a back of the envelope estimate- I'm one of those people that believe all models are wrong and some just may give you useful information. But if you just look at a population of the United States, 330 million people. If half the population gets infected, you know 165 million people, of that 165 million, the best data we have today still supports the fact about 80 percent of them will actually have mild symptoms to asymptomatic illness, won't even know that they had this unless they were tested. 20 percent will seek medical care. Of those, about 10 percent will be hospitalized. Of those, 5 percent will actually end up likely needing intensive care medicine, and about one half to 1 percent could very well die. Well, that one half to 1 percent, if you do the math back on the 165 million people, you get a sense of what we're talking about. 800,000 to 1.6 million people. You know, we're at 80,000 today with only 5 to 15 percent of the population infected. So the numbers are very realistic. So that's the care we're talking about. If we end up hospitalizing of the 5 percent of that 165 million people, we will overwhelm ICU care throughout this country, particularly if it occurs over a short period of time like a big peak. So this is what we have to plan for now. We have not had the worst of it yet potentially. We have to plan for that. 

MARGARET BRENNAN: And given that so many hospitals are financially stressed by having had restrictions on what are essentially profit centers for them, some kind of the medical procedures. Does that worry you? Has some of the policy hurt our hospital capacity?

DR. MIKE OSTERHOLM: Absolutely, and in fact, we have kind of a perfect storm occurring. For many of these hospitals and healthcare facilities that were already suffering, one of the bright spots were a lot of the outpatient procedures, the one day surgery type operations that actually brought in a substantial source of revenue, well, of course, those were basically postponed, canceled with this to make way for potentially needing additional resources for the COVID-19 infection. One of the things that we haven't fully understood or equipment that we also need for our health care workers who are working in the COVID units. And we're already seeing clashes within organizations as to who gets the PPE, whether we do the surgery or not, or whether they're in the COVID unit. I had a conversation with one of the individuals leading one of the COVID units here in the state of Minnesota who just this past week made it very clear that they were running short of protective equipment and that they worried desperately about what same day surgery reestablished what it might do to that protective equipment status. That's what we're up against.

MARGARET BRENNAN: Wow. Neel, this question is for you from Brian at U.S. Bank. Are equity markets acting rationally right now?

NEEL KASHKARI: Well, I think equity markets have bounced back because in early March, when this really started to break out, there was risk that there would be a financial collapse. And the Federal Reserve, through our many different emergency programs, acted very aggressively to provide liquidity in the financial markets and to basically say we are standing behind the financial system. So I think that risk of that financial collapse has really diminished. And that's why you're seeing the equity markets bounce back. But I don't put any- I don't draw any comfort from the stock market in terms of their ability to predict where this virus is going. I mean, if experts like Mike have as much uncertainty as they have about the path ahead for this virus, the stock- stock pickers are just wildly guessing. I mean, I'm reminded of April and May of 2008. In March of 2008, Bear Stearns was rescued in April and May, policymakers and the equity markets all breathed a sigh of relief and said, maybe that's it. Maybe the worst is behind us. And then, of course, the fall of 2008 came and it made March look like a- just a speed bump. So, you know, the stock market's going to do what it's going to do. The bond market is signaling they expect slow economic growth and they expect low inflation in the future. I take more signal from the bond market. But at this point, I want to listen to health experts more than investors.

MARGARET BRENNAN: And so, it sounds like what you're saying gets to this question from Stephanie at Alliance investment. Do you expect the recession to be quick or long and drawn out? It sounds like long and drawn out. 

NEEL KASHKARI: Long and- long and drawn out. And even if we return to growth in Q3 or Q4, which I would expect, you know, the- the shutdown is very steep and very sharp. We- I would expect we'll return to some growth, but we'll be nowhere near back to where we were in terms of the productivity of the economy, the production of the economy as we were back in December of 2019. And the unemployment rate, unfortunately, I expect to only come down gradually. It went up very, very quickly at record speed. Unfortunately, I expect it to come down much more slowly. And that's where the real pain is for families that are directly affected by those job losses.

MARGARET BRENNAN: And doctor, if the coronavirus returns in waves, this gets to a question from Susan at University of Minnesota, before a vaccine is- is approved and widely available,  how do you return? How does a society return? Are these actually very concentrated pockets? Can they be controlled? Can we continue as a country chugging along and just have things be walled off in one region?

DR. MIKE OSTERHOLM: This is a very critical question. I just would say the underlying premise of it is we are not driving this tiger. We are riding it. And so one of the challenges we have is understanding what it is we can do, where we can do it. I think that in a major, big peak, the most important thing we're going to do is major physical distancing to keep people from spreading to each other and trying to shave off the top of that peak. But we won't change the peak. It will happen. I think that's the challenge that we're running into right now of what can we actually do that will make this go away? And I don't think there's that much. I think we're constantly going to be, in a sense, in countries like the United States, just trying to shave off the disease occurrence, but not stopping it.

MARGARET BRENNAN: So what does that mean? Can I say- would you get on a plane right now? Would you fly? Is it safe?

DR. MIKE OSTERHOLM: I would not right now. In part because of just from the standpoint of work- where we're at today. I think I'm one of those people who have now come to understand the power Zoom. How many days have I been jet lagged trying to  fly to a one day meeting at some distant location. So I think from a travel industry that's going to change. From a risk standpoint, I still do believe it's a- it's a risk that I don't want to take. I know too many of my friends and colleagues who have become infected. You know, I'm a 67 year old man who basically I'm not once what I once was relative to the risk pattern. And so I think people ought to take that and this is an important message. There are things we can do for ourselves. You know, we don't have to count on the government to tell us, don't go into big crowds if you are somebody who is at an increased risk. I think there's things we can do to help each other. One of the things, I put out a weekly podcast, and I just think now is the time to be kind. How many people in our communities need somebody to take their mail or to get the groceries or do things like that. Help people actually stay out of harm's way. And I think that's something that we really desperately need to look at. And I'm one of those people that say I'm not going to put myself needlessly in harm's way right now.

MARGARET BRENNAN: Neel, you've talked about it's kind of all up to us as consumers. And certainly they're the engine of the economy. But given how many industries are reliant on that confidence being restored, is it only logical to assume that we're going to have to continue to see federal bailouts of- of industries or federal rescue for industries like airlines?

NEEL KASHKARI: You know, I do think it's likely. I mean, airlines or hotel operators, if- if they were to you know, if this continues the way it may, the way that Mike has been describing the virus, we're just trying to hold on, if you allow a lot of industries to go through bankruptcy, you end up destroying some of their productive capacity. It's not simply that you're- you're changing ownership. There are, you know, people get fired. Expertise goes out the door when people get fired and laid off, partnerships get destroyed between different businesses. There actually is a destruction of the productive capacity of the U.S. economy if we have waves of small or large businesses going through bankruptcy. Now that doesn't necessarily mean you wouldn't have any right sizing. I mean, could one debate how many airlines the U.S. economy needs, how much consolidation there has been, there needs to be? We do need to have an airline industry. We are going to need to travel again. Is it going to look exactly like it looks like in 2019? Probably not. Same thing with hotels and so on. I mean, I don't know, for another example, I don't know who's buying cars right now. I've got to believe the auto industry is severely hurt by this. I'm barely driving my car. So, you know- we have two cars. We barely take them out of the garage now. So our need- our use of these vehicles is dramatically diminished. So it's- it's affecting wide swaths of American industry. But we do have to make sure we preserve the productive capacity of our economy. And that's, you know, uniquely- it's uniquely Congress's ability to do that.

MARGARET BRENNAN: Uniquely, Congress's ability. So what jobs do you think exist on the other side of this? I know we don't even know where the other side is at this point. But, you know, Eric Schmidt said to us this week on FACE THE NATION that he thinks about 10 years of change has happened in two months.

NEEL KASHKARI: Well, I think, you know, as- as Mike just said, I mean, I think we're all learning the power and the convenience of some of these online technologies. Our own bank, here at the Minneapolis Fed, we have about 1,100 employees. 95 percent of us are working from home full time and we're able to do that effectively. I do think things are lost, that it's not the same being able to be in person with your colleagues sitting around a conference table. So I do want us to get back when it's safe, back to normal. But I think our- our minds are now open about other ways of doing work that could be effective. And maybe it ends up being some kind of a hybrid. Just think about education. How many family's lives are turned upside down because their kids are not in school? And there were education disparities before this crisis. And now so many families across the country don't have access to online learning. And so their kids are at an enormous disadvantage. And so I would imagine that the model- the delivery model of education, both K-12 and higher ed is probably going to change, not overnight, not completely, but probably will become embracing of these technologies more so. So I think I agree that we're going to see a lot of change in an accelerated period of time, but we don't know exactly what the other side looks like.

MARGARET BRENNAN: And Doctor, what is this doing to healthcare and pharmaceutical- the pharmaceutical industry in this country? should we expect that America wins that race to be first to a treatment and vaccine?

DR. MIKE OSTERHOLM: Well, first of all, the pharmaceutical industry situation right now is a very illustrative situation of our vulnerability. Our group began studying over 18 months ago the shortage of drugs in this country that we need right now for care. And we identified 156  life-saving drugs that you need within hours or people die or are seriously injured. What's on the crash cart? What's in the emergency room? What's in intensive care? Of those 156 drugs, all of them were generic. Most of them are made outside the United States. And for the vast majority of them, they are in very short supply. Sixty three of them before the outbreak ever occurred in Wuhan, were already in short supply. Imagine that most of these drugs, in fact, put us at great vulnerability because they're made in China and India, which has a control over them. And even our own Defense Department gets those drugs for its members- from those same sources. And so we have a vulnerability there, and we're tracking, for example, in this country, just let me give one example, the drugs you need to put somebody on a mechanical ventilator, they paralyze you in a way that allows that ventilator to be inserted and used, they're in short supply. We may run out of those drugs before we run out of ventilators. And people haven't thought about supply chain integrity and the issues of rely- of what we rely on. In the pharmaceutical industry, this is a huge piece. Hopefully this is going to cause us to have a new understanding of what is critical services and products and how do we have access to them and where they're made. I would just add that ironically, besides China, which is the major source for these, the other area in the world that we got a lot of antibiotics from for the United States was the Lombardy region of Italy, the other area that got hit during this pandemic. So it just shows you the vulnerability that we as a world have for what can be a global or even localized impact.

MARGARET BRENNAN: And what gets the industry to change that? I mean, can you swiftly change that supply chain?

DR. MIKE OSTERHOLM: Well, I think this is another one of those discussions that are surely a combination of public policy, business, economy. I just would point back I was very involved with the 2003 SARS outbreak that occurred around the world. At that time, you know what, no one talked about supply chain challenges, even though it was centered in China. That's how much our world has changed between 2003 and today, where today during that- since that time, supply chains, manufacturing, critical goods, services coming out of China are absolutely critical in terms of what we do today. So we've had this rather rapid evolution of changing worlds of manufacturing that are important to us. And now we're going to have to have that discussion. What do we do about what's happened in those last 17 years and how do we- how do we want to address that?

MARGARET BRENNAN: And Neel, we're running out of time here. But just on a final note, what is your prediction of what- of where we are by November and the time of the upcoming election economically? What do you see as the amount of economic pain for the average American?

NEEL KASHKARI: I mean, unfortunately, MARGARET, it's going to depend on whether we have that big spike that Mike is talking about in the fall as has come with prior flu pandemics. I mean, I sure hope not, that we're not enduring that. I hope we're on the road to recovery, even if it is a gradual recovery. You know, reflecting on the conversation we're having, it sounds quite depressing. I mean, honestly--


NEEL KASHKARI: --but I'll tell you, the best news that I've seen in the past couple of months is how swiftly both political parties came together and took bold action to support the American people and the American economy in what they've done so far. And that gives me great confidence. I mean, our chairman talked about the great fiscal power of the United States. We have tremendous fiscal capacity. And if our leaders, our elected leaders, continue to say we're going to work together to do what's necessary for the American people, that gives me great optimism that as tough as this road may be, we are going to get through it and we will support one another to get through it and come out and then put everybody back to work on the other side.

MARGARET BRENNAN: All right. Thank you so much for this conversation. As you said, it is a little bit depressing, but I think it's- it's important to have some reality check from people who know and are looking and thinking about these big issues. Thank you for your time.

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