Neel Kashkari was (back) on CBS’s “Face the Nation” Sunday, and unlike Jerome Powell, he’s not shy about using prescriptive terms when it comes to discussing how Congress should exercise its spending powers.
“While historically we would worry about racking up too much debt, we’re generating the savings ourselves [and] that means Congress has the resources to support those who are most hurting”, he told John Dickerson, referencing the surge in the personal savings rate.
“Those of us who [are] fortunate enough to still have our jobs, we’re saving a lot more money because we’re not going to restaurants or movie theaters or [on] vacations”, he continued. “That actually means we have a lot more resources as a country”.
I’m not sure that’s the best way to conceptualize of the nation’s current predicament, but if it works to recast the narrative around the surge in the savings rate and, in turn, helps to prod recalcitrant Republicans along, then so be it.
Some members of the GOP have pointed to the rise in the savings rate as evidence that more stimulus isn’t necessary. As discussed here on Friday, it’s starting to come down (figure below), which is either good news or bad news depending on how you want to look at things. On one hand, it suggests Americans are spending, but on the other, it could mean that to the extent the benefits doled out in the wake of the panic were superfluous for some folks, they are less so as the crisis drags on and money is spent on necessities.
If the higher savings rate is, in fact, explainable by reference to government handouts and not to Kashkari’s story about well-to-do Americans not going out to eat, then accepting the rest of his argument suggests a certain circularity — that is, transfer payments are propping up the savings rate and the higher savings rate is then used to justify more transfer payments. Obviously, that’s absurd.
Less absurd is Kashkari’s contention that low rates means Congress should borrow to fund stimulus. “Right now the US can fund itself at very, very low rates”, he remarked, during the same interview. “Congress should use this opportunity to support the American people and the American economy”.
No arguments there, although I would generally contend that Fed officials should just drop the charade and give the public the unvarnished truth, which is that they are capping borrowing costs for the government and monetizing the debt issued to fund the stimulus. There’s little (or no) utility in trying to dance around this anymore.
After reiterating his contention from earlier this year that, absent a vaccine, the economy is likely to suffer from rolling stoppages like those we’re seeing in hotspot states currently, Kashkari suggests that it might be preferable to just institute a “hard” lockdown in order to get the infection count lower and set the stage for a more sustainable recovery.
“If we were to lockdown really hard… for a month or six weeks, we could get the case count down so that our testing and our contact tracing was actually enough to control it”, he said.
“I hate to even suggest it”, Kashkari added, referencing the “hard” lockdown option. “People will be frustrated by it”.
They sure will, Neel. They sure will.