Of dallas. He is appointed in september of 2015 and he represents the 11th Federal Reserve district on the federal open markets committee. Prior to his service for the dallas fed, kaplan was a martial professor of management practice and a senior associate dean at Harvard Business school. Kaplan had a 23 year career at Goldman Sachs and was ultimately named a senior director of the fern before joining harvard into thousand and six. Today, mr. Kaplan joins us to talk about what he believes the road to u. S. Economic recovery must look like in order for the country to bounce back from the damage done by covid19. He is also going to share his Economic Outlook for the rest of the country and into this year and into 2021. Mr. Kaplan, the virtual podium is yours. Right, thank you. Thank you kimberly and thank you everyone for having me here today. I will talk for a few minutes about, as kimberly said, the National Outlook and some of the key things that we need to do and some of the key challenges we face and then i will be very happy to take your questions. Let me start with our outlook for 2020. It is our dallas fed forecast that we will, when the years over, 2020, the u. S. Economy will have contracted in the range of four and a half to 5 . That includes the assumption that, in the Second Quarter of 2020, we likely contracted on an annualized basis, about 35 . When i say annualized, basically multiplied by four. Then, it is our judgment that we will grow in the Third Quarter as well as the Fourth Quarter. The issue will be how fast. Even with that rebound, it is our judgment that will still wind of contracting between four and a half and 5 . Along with that, it would be our best judgment that we will have an Unemployment Rate somewhere between nine and 10 . As we look ahead to 2021, then, we would expect to have above average rate of growth in excess of three, three and a half percent. Even with that, when we get to the end of 2021, we will likely have Unemployment Rates somewhere between seven and 8 . That is all very challenging. While the Unemployment Rate today is approximately 11 , the other gauge of labor slack that we look at is referred to as u6, which is the unemployed, discourage workers, plus people who worked parttime who prefer to work fulltime, that measure is about 18 . All this to say that we have a substantial amount of slack in the economy, we have a substantial amount of unemployment and weve got a big challenge on how to grind down that Unemployment Rate to some lower level and rebound from this deep hole that we have had in the Second Quarter. Now, Monetary Policy has played a key role in this as well as fiscal policy. At the early stages of this crisis, we worked very hard at the fed to buy treasury securities, Mortgage Backed securities and try to make sure there was good liquidity in those markets. In addition, we instituted with the backing of the treasury, in conjunction with the treasury and congress, a number of, so called 13 three programs, which were programs aimed at Corporate Bonds, money markets, Municipal Bonds and a whole range of other markets intending to try to make sure we restore market function. In addition, we had a number of programs like the ppp program, most recently the Mainstream Program and i will come back and talk more about that, which were intended to make sure that, in addition to stabilizing the Financial Markets, that we did what we could to try to make sure there was access to credit for small and medium sized businesses. As a result of these programs, i think market function is dramatically improved. A number of businesses that have extended their debt maturities and issued new debt and done what they could to improve their liquidity, substantial number of Small Businesses access to the p. P. P. Program. The Mainstream Program has been now introduced, although there is not yet substantial take up in that. Maybe we will talk more about that in the queue and a. Our purpose was to make sure that the Financial Markets, in fact work and there was access to capital. We think from here, there may be more that the fed will need to do and certainly, we believe there will be a need for more fiscal policy. In particular, while Unemployment Benefits may need to be restructured, we think they will need to be continued with this high level of unemployment. Maybe in a different form. I know the 600 dollars will be reexamined. But, in some form, they will need to be continued. In addition, another key aspect of fiscal policy we think would likely be appropriate to aid to state and local governments and municipalities who, without some additional support, will need to come back and actually do layoffs at a time where we are trying to grow the economy and reduce the Unemployment Rate. Having said all of that, i have been very vocal for the last number of weeks that the forefront of Economic Policy in the United States at this point is likely health care related. While fiscal and Monetary Policy have a key role to play, there is no question, based on conversation of what ive had extensively with epidemiologists and Health Experts throughout the United States, that if all of us wear a max, we would likely substantially mute the transmission of this disease and that would translate into us growing faster. We would have higher gdp from here and we would have a lower Unemployment Rate. At this stage in this crisis, the resurgence of the virus and how well we contain the virus is likely going to be at the forefront and the most critical aspect of how fast consumers are willing to reengage in a whole range of activities. In turn, will determine how fast we grow. So far, the following of Health Care Protocols, wearing masks, extensive testing, ability to do contact tracing, has been uneven throughout the United States. I think part of my job is to say the fed will stand ready on the one hand to do more and we have the capacity to do more. There will be a need for more fiscal policy, but i think at this stage, the forefront of Economic Policy in the United States and the key determinant at this stage of how fast we will grow from here is going to be how well we follow these Health Care Protocols. With those introductory comments, i think i will stop there and go back to kimberley and then it would be ready to take a number of questions from the audience. Thank you so much mister kaplan. I am going to get going on q a the. Lets take a moment to remind our viewers that they can submit questions as well. You can join the conversation by sending an email to feel headliners press. Org. Mr. Kaplan, i would like to start with your point you just made about universal masking. This is something that Health Care Officials have been asking for for sometime. Many other leaders have been calling for. What difference does it make when you in your role, even the people at golden sacks are calling for Something Like this . Well, for my purpose, at points, sometimes in the national dialog, i have heard, at times, that maybe there was some tension, tension between following the Health Care Protocols and reopening the economy and growing faster. What i think is very important for me to say in my job is i do not see a tension between those two, what im saying it is the Critical Path towards reopening is to follow those protocols. Epidemiologist ive talked to feel that people would be much more likely to be able to go back into stores, to get on airplanes, to engage in going to restaurants, to engage in leisure and other activities if we had more widespread wearing of masks, because they are convinced that that will substantially mute the transmission of the disease. If we do not do those things, it will be more likely that we will have to slow the rate of reopening, limit the capacity of things like restaurants, which is now happening and we will have greater transmission of the disease. My purpose, and i think part of my job is to call out, there is a direct connection between growing faster and following these protocols. It is critical and i think for me as a Monetary Policy maker, it is important that i call that out. If we do not do a good job at those things, we will need more monetary and fiscal policy. They wont be as effective as following those Health Care Protocols and, i have said many times, why not follow these policies and have more discipline . It would be better if we could refrain from having to do substantially more monetary and fiscal policy and i think that is possible if we follow these protocols. I think it is critical that i call that out. What does it say about where we are as a country if the argument that wearing a mask leads to faster growth, Economic Growth is a more compelling argument for some that than wearing a mask will save lives . I will leave that to others to judge. But i think it is important that he calls this out. Individual freedoms are important, but there are many thing we do in this country, such as wearing seatbelts, not texting when we are driving, many other activities that we are very careful about because we know society will work better, the economy will work better and we will have more Economic Growth. I am setting aside the moral aspects of these arguments and even the impact on fatalities and hospitalizations. What i think is critical for me to say, if the rate of hospitalizations goes up and the death rate in this virus continues to be higher than it ought to be, it will put a Chilling Effect and it is having a Chilling Effect on Economic Growth. I see that and all of the work that we are doing at the dallas fed and i think it is critical that i call it out. The ongoing lockdowns have been particularly hard for working parents. Given where we are right now the pandemic, with the surge in cases in many places, do you think that schools should be reopen for inperson instruction in the fall . I will leave that to others. Listen, i have two children myself who i would like to see very much back in school in the fall for a lot of reasons. I think i am sympathetic to the leaders that need to make those judgments. I have heard, in talking to School Officials and elected and appointed leaders in my district and around the country. To the extent that we can meet the transmission of the virus, it will make it far more likely that we will be able to safely reopen schools. To the extent that we have the virus raging in certain localities, it will be more challenging. I understand its a bit of a political question, but the reason im asking you in particular is because of the productivity side of things. Its not only affecting who can go back to work, who can be working, especially with is there any other information you can give us on the implication of what the strain of working parents is doing to our recovery . Yes, clearly if students cannot be at school, which right now they cannot, they cannot go to camp, they cannot do other outside activities. Childcare is challenging for many families in this country, either because of affordability, or even right now availabilities. It means parents have to work at home. There are some jobs that make it more likely to be able to work from home, but there are many jobs where we, where workers do not have that option. They have to go to the workplace to engage. All of our work at the dallas fed shows the extent do you have a higher Educational Attainment level, College Education or better, you are far more likely to be able to work at home. To the extent you have a High School Education or lest, you are engaged in the service sector. It is very difficult for you to productively do your job from home. You may not have that option at all. You have to go back into work, physically in order to do your job. If your kids are not in school, that is much harder to do. What it means, kimberly, is we will have lower gdp, lower growth, higher unemployment if we are not able to get the kids back into school. We have some questions here from the former president of the press club and is currently a senior economic analyst at bank rate. Com. He says, first, a shout out to my fellow jayhawk, mr. Kaplan. I will take issue with that as someone who went to missouri. We will move on. Question number one, do you have any thoughts about what the most effective forms of fiscal stimulus look like during this time as Congress Considers what to do next . Yes. I will give a shout out back to a fellow jayhawk. In terms of fiscal stimulus, as i mentioned, the two things that i think our highest priorities right now based on our work, our again, extension of Unemployment Benefits. I understand that the Current Program is being discussed, it likely needs to be restructured probably to create more incentives for people to get back to work. Having said that, the program likely needs to be extended. Again, i mentioned another thing we are seeing broadly. While municipalities are able to borrow, its that borrowing, it will not replace the fiscal wall they have from lack of tax revenues. Most municipalities, states, cities, others need to balance their budget. They will need to come back and lay off. Again, at a time that we are talking about reopening schools and there is more burden following local states and municipalities, Hospital Services and others, i think some fiscal policy, fiscal measures to deal with that loss of revenue, so that these municipalities do not need to cut back. That is another thing that comes to mind. Longer run, be on this crisis, i can see where this likely needs to be a discussion. Infrastructure spending on other programs, but i think that is further down the road. I am sensitive to those first two i mentioned now, particularly as we are in the midst of trying to get this fires under control. Mark also asked, do you believe there will be long term negative impacts to commercial real estate if firms and employees learn that working from home can be just as effective for certain kinds of businesses . So, we are watching that very carefully and we are already seeing lots of companies, im talking to these companies that are now questioning everything. How many employees will they need . What will be the disposition of those employees . How much can they use technology . Maybe more than before. How much space do they need . Some have come to the conclusion that they will want to get back to the office, they may even need more space because of social distancing. Others are thinking they need less of a footprint. That is on the commercial side. We are seeing a very substantial impact on retail real estate. Malls, either in closed or prestanding. I would think there is going to be many implications for restructuring of that industry, as well as for a residential real estate. Back to where we started, i think it is a little too soon to say for many businesses. What goes with that, how much will people travel . How much will they stay in hotels . My own guess is, as we get beyond this pandemic, people will get back to traveling. They will realize the benefits of having people together physically, but i think on the margin, they are going to be a lot more receptive doing things remotely than they were before. Yes, that will have an effect on real estate and will have an effect on travel, to some extent and also on lodging that goes along with travel. The last one from mark, which is a bit more regional. Texas has seen an increased diversification beyond its traditional reliance on the oil industry compared to a few decades ago. What impacts do you see longer term for your region and our nation if green Energy Continues to grow and if the marketplace embraces electric vehicles . Okay, so to marks point, as opposed to 30 years ago, today the Energy Business as a percentage of gdp for the state of texas is probably, right now, as we sit here today, between eight and 9 . Much lower than it was in previous decades. Still significant. I think most people i talked to in the Energy Business believe that there is going to be substantial growth in alternatives. Very substantial. Our research at the dallas fed is consistent with that. We believe at the dallas fed, even with substantial growth alternatives, you will have some reliance on fossil fuels, substantial reliance for the next 25 to 50 years. Right now, in this year, u. S. Production is likely to go from about 12. 8 Million Barrels a day at the end of last year, to about 10. 8 Million Barrels a day by the end of this year. We will have a decline. Many wells are being shed in. Many of those will come back online before the year is over. But the decline curve on shale is so rapid, we are not going to drill enough to make up for that decline. From here, we think we are going to see in the future substantial growth and wind, solar. Texas, by the way it has got very substantial deployment of wind power and other alternatives. I think, even with that very aggressive growth, and even with the growth in the electric car and other modes, we think you are going to still see the world be reliant on energy and, our guess is that what you are going to see is u. S. Production may not decline a lot from 10. 8 Million Barrels a day, but it will probably grow very slowly as new demand is filled by other alternatives. There will still be a key role for fossil fuels. Thank you for that. You spoke a couple of weeks ago with my marketplace colleague david and, at that point, you said you thought the economy had pretty much hit bottom. Now we are breaking records for new cases every day. Do you still think that we have already seen the worst of the economic fallout from the pandemic . It depends on how the virus unfolds from here. What our work at the dallas fed suggested is that the economy did bottom in april. We started to grow again toward the end of april and, certainly into may. That was reflected in the jobs numbers that we saw, the job surprise. The p. P. P. Probably was one of the big elements of that. Many businesses, Small Businesses brought people back, wanted the p. P. P. To be forgiven and we saw that in the employment numbers. The issue was that we were hoping for meaningful double digit growth in the third and Fourth Quarter and i think we were seeing it until, say, the second week in june. What we are seeing from all our work with High Frequency data and other, lots of conversations that we are having with businesses, i think growth is slowing. I guess to answer your question, i do not think we are going to go back. I think it is unlikely we will go back to where we were in early april. The issue is, how fast are we going to grow out of this big decline that we had in the Second Quarter . Unfortunately, with this resurgence in the disease, it is muting that rebound. It is muting that growth. Obviously, if the virus gets worse, and we have further action that needs to be taken beyond what has been taken, that will further mute growth and so we are watching a very, very carefully. That is why it has led me to call out, if we all wore masks, i think that is probably the most important thing we can all do right now to make sure that that rebound in growth is faster, not slower. At the moment, that rebound is slowing. What do you think will be the lasting effect of all of these businesses that shut down, reopen and now they are having to shut down again . So here is what im seeing and i have extensive conversations with Small Businesses, mid size businesses, Large Businesses every day, every week. For those Small Businesses, restaurant for example. They, their business went to zero, they had to shut down. Other than for restaurants, maybe takeout orders, they took out the p. P. P. Many of them, they brought workers back to the extent that they could, got the lone forgiven. They reopened, they started to inch up 25 to 50 , on the way to 75 . As you said, they are now back trending down. Business is slower. They do not have access to the p. P. P. Again. What is going to happen . Unfortunately, many of those Small Businesses that might have made it without the resurgence in the virus will not make him. I think you will have more Small Business failures and we are seeing that. In addition, mid size and larger businesses will bring back fewer people. It is also causing those businesses to focus even more on technology and Technology Disruption to replace workers. The more this goes on, the more likely it is. We will still have a rebound in hiring, although i do not know how fast it will be unless we can make the virus. The longer this goes on, the more likely that some workers will not have a job to go back to. They may not have an industry to go back to. Many of those workers are going to need to be retrained and get their skills retooled to find another job at another industry. Unfortunately, that process takes time. I think the longer this goes on, the harder it is going to be or the slower it is going to be to drive down the Unemployment Rate. That is what im seeing right now. That is what im very concerned about. You and your colleagues at the fed has said you all basically do what you have to do to support the markets and support the economy. So, i will take this moment to get your thoughts on modern monetary theory. Because this is an idea that was really dismissed by many people when it first started bubbling up in conversation. Now we are living a real life experiment. As youre thinking changed on this at all as we go through this . The not really and so, you are right to say. If you ask me about it six months ago, or even four months ago, the thought of running much more aggressive deficits to Fund Spending with the thought that there would not be consequences, i was a skeptic and still am a skeptic about that. I think there is a reckoning that comes with running higher deficits. It is not free. Having said that, we are in the midst of that experiment, whether we like it or not. We have dramatically increased the national debt. We will have larger deficits. The fed has increased the size of its balance sheet. There will be ramifications and we are working on trying to understand them. Ramifications for the dollar, the dollars is the World Reserve currency. Other implications that we are going to learn about as we go. My only view is, now that we are in the middle of it, i would like to see actions that limit, to the extent possible, how much more debt we need to incur and how much more Monetary Policy we need and that is why when i compare more Monetary Policy, more fiscal policy with more and hearings and discipline on following the Health Care Protocols, i would far rather and it is much more inexpensive for the country to follow the Health Care Protocols then engage in more deficit spending and Monetary Policy to deal with the slow growth that we are facing and high Unemployment Rate. Right, now we are in the middle of it and, you are right, we are doing a realtime experiment and we will learn realtime about the implications of it. Staying with the Monetary Policy for a bit longer. He said on fox business if you days ago that you and your colleagues at the fed have to be mindful of any distortions your actions might be causing in the markets. Lots of people have been talking about this increase in trading, pumping so much liquidity in. What distortions are you seeing in realtime and you need to do anything to mitigate those. A couple of things. We, through our announcement of our 13 three programs. For example, on Corporate Bonds, by not only buying Corporate Bonds and buying Corporate Bonds as indexes, buying high yield bonds, it has somewhat muted the widening of credit spreads. I think those actions on Corporate Bonds, for example are necessary in light of the crisis that we are in. I do think we need to be mindful as we work through this crisis and hopefully we get the disease under control and more stability. I think it is very important that the Market Pricing signals actively reflect the risk and if you do not have that, you can have distortions which can cause people to take more risk than they should, may cause people to leverage more than they should otherwise and i think they ultimately increase the fragility of the financial system. While in a crisis, you want to do what we can at the fed to make sure that the treasury market, merging Mortgage Backed security markets works well, there is good liquidity and the Financial Markets work well. I am always cognizant that we will have to watch very carefully how we emerge from this crisis because there is a point at which we need to let some of those subset and show restraint and let normal market function takeover and we know if some of these programs. I think we will be healthier for if we do that, but those are tough judgments to make, but they are judgments that we will need to make. What do you think of the argument some have made that we are no longer in a free market . I do not think we are at that point. But i think some people have been frustrated when they look at credit spreads for example. In their view, they do not accurately refresh. They look at risk assets generally and they say boy, these risky assets look elevated. I think unfortunately, some of those issues come along with being in the middle of a historic decline in gdp and historic rise in unemployment, loss of jobs. I think a number of those actions were necessary. The key is what we do from here. How long does this need to go on for . Because i do believe for those who say that i am a believer, that we will need to get back to more unaided market function, without as much intervention from the fed, we are just not at that point yet, but i think it is wise for us to be telegraphing as the economy improves. We will be appropriately showing restraint and pulling back some of these programs. Its just a question of when and what way is that most appropriate. I think its important to telegraph that we intend to do that. You say when the economy improves, there seems to be two different economies happening at the given moment. Theres whats happening in the market and then there is whats happening in peoples lives. Do you think that youre actions are exacerbated . The gap between the markets and peoples relived economies. I would say the difference between the regular economy and the markets, the regular economy is whats going on right now. The stock market, for example, is a discounting mechanism that has the ability to look at a year, two years, three years and into the future and discount those results forward. I will leave this to market commentators that used to be in the business, in the markets my entire adult life, but i will be careful and commenting too much on the markets. I would say what im seeing is Financial Market participants are looking out ahead a year, two years, three years and theyre looking beyond the time and theyre looking to a time when the virus has receded. Either because of management of it or because of a vaccine. I think that is the disconnect you are seeing between the markets and the economy. In my experience, normally, if you see that kind of disconnect, it does not go on indefinitely. It normally will get reconciled and this will as well. I think you will see the performance of the economy and the performance of the markets converge. I am expecting that and i think you are already, in some cases, starting to see. Black and hispanic people are clearly feeling the worst of the health and economic consequences of this. We were just talking about these differences merging together. The fact that these groups are feeling this so on equally, what does that mean for what the recovery looks like . I think it is a real problem in that before this crisis, we had, over the last couple of years made Good Progress in narrowing the gap between black and hispanic unemployment and the overall rate of unemployment. The Unemployment Rate for women with less of a high school, with a High School Degree or less, that had improved. A lot of these underrepresented groups, they, their Participation Rate or Unemployment Rate had improved. Unfortunately, a lot of that progress has been reversed the last three months. We have seen that this pandemic has disproportionately affected blacks and hispanics, but it is also disproportionately affected those with lower levels of education. People who do not have the option to work remotely. So, what does it mean . It means, if we do not address those issues, we are going to have slower Labor Force Growth and lower productivity. I talked a lot before this crisis about the need to improve Early Childhood literacy, Educational Attainment, skills training, particularly as it relates to blacks and hispanics and those with a High School Education. Families with a High School Education or lower. If we improve Educational Attainment and skills training for those groups, we will have faster Labor Force Growth and we will have faster gdp growth and better productivity. Gdp is made up of growth in the workforce and growth and productivity, and we need those groups to do better if we are going to grow faster. And drive down the rate of unemployment. This i think is a big challenge for us. I think it is a challenge for us now. In particular, on beefing up skills training now to help people who have lost their jobs to get back into the workforce, it is critical, or we are going to grow more slowly and have a higher Unemployment Rate and i think that is better for all of us. Skills training, super important. You have also said that systemic racism is, in effect, a big weight on the economy. There seems to be something of a reckoning happening in many workplaces. Talking to you from the National Press club, weve had a lot of these situations in media where there have been people pushed out of their jobs for history of racial discrimination. It is happening in Corporate America as well. What do you think of this moment of reckoning regarding systemic racism in workplaces . What role do you think these sort of bottom up efforts have to play in rectifying . So, in my public comments, i have been asked a lot about systemic racism. I have not been quick to use that term. I have talked a lot about inclusion and that i find sometimes using the term systemic racism can have a Chilling Effect on all of the parties that need to get together to address the impact of it. I do not doubt that there is systemic racism in the economy and out there, but i have not been quick to accuse anyone of that. What i have said is that i think it is critical that we connect and realize that a more inclusive economy, where blacks and hispanics can do better and we close the gap between the Unemployment Rate and opportunities and Educational Attainment for blacks, hispanics in the rest of the population is an economy where we will grow the labor force faster, improve productivity and will grow the whole economy faster. So, i think it is critical that we do this and it is an urgent challenge now. Some of these issues may be due to, yes, peoples practices, but others may be due to blind spots and allowing some of these problems to fester. Particularly again, Early Childhood literacy, allowing Educational Attainment rates to lag. We have to address those things now and connect it with faster Economic Growth. It is clear to me it is connected with growing faster. But, specifically, if we are going to address inclusiveness and a more inclusive economy, what role do you think this individual level of accountability in workplaces across the country plays into that . Hi. It is the role of all of us, including me, all of us in our businesses need to go back and look at education in our communities. Early childhood literacy. What is the quality of our School Education . How is it affecting blacks and hispanics . I served on the board of something called commit, which works on that locally here in the state of texas. All of us need to take ownership of that. Then, in addition, in our own companies, look at diversity of people we are hiring, commotion, compensation and all of that, all of us are accountable for this. The reason i mention, i use the word inclusion is that there are many Business Leaders i worked with, and im one of them, that need to do a better job. We only to do a better job. It is not necessarily because some of these Business Leaders are even aware or were overly aware that they were of this happening. I think this moment is an excellent opportunity for all of us to go back and rereview and be more aware of how we are falling down on this and how we can do better. Again, connected with improving our local economies and making this a better country. Back to looking at the local economies. In many places, the state and local jobs are a big part of what keeps that local economy going. You know, you talked earlier about the hit to state and local budgets and what the fed has been doing to support those. Can you give me a little bit more of an outlook of what you see a head for state and local budgets in this pandemic and what its going to mean for the recovery . Yes, right now i see that its a problem. Every mayor, local leader, state leader i talked to, tells me that if there is not relief, Fiscal Relief in the form of grants, not more loans, but grants, they will need to cut back. They are going to need to make cutbacks in terms of people. Secondly. On the school side and on health care. States and municipalities are being called on to do more. The issue we just talked about with more people out of work and stresses in local communities and need to do a good job in our local communities. All of that is stress by lack of budget availability. Unless we address this, i think we will move more slowly and this recovery is going to be more challenging. You mentioned earlier in your comments that there was not necessarily a lot of pick up just yet. Why do you think that is . The challenge is this. Were creating this program. We had already done the p. P. P. For Small Businesses and that was a loan to grant program. In other words, you can get your loan forgiven. On the main street program, that is just purely a loan program. Most businesses that i talk with at the outset of this crisis immediately went to their banks to try to get a debt loan and get as much liquidity as they could. For those who could, they did. The issue with the Mainstream Program in addition its because its taxpayer money and its a loan program. There are Credit Conditions. The other Credit Conditions that have to be met if you are going to be eligible for the loan and for a bank to be willing to make that loan. The intersection of those who have not already got loans from the banks and who still need one, versus their credit quality is good enough that they need the tests of the program and the banks are willing, who have to hold 5 of the loan, are willing to make the lone. The intersection of that is probably somewhat smaller than people would like to see. In order to expand the intersection, it would probably have to mean that that program would take more credit risk and be willing to absorb more losses. That is the dilemma and that is the balance that i think has been wrestled with and why the probably is not as much take up of the program as people would like. So, whats the fix for that . Well, one is this crisis goes on. There may be businesses that already got lending who decide they need more in this program will be there for them. The other thing that we will have to weigh as we go, will some of the credit terms be relaxed . This is a judgment, this is not for the feds. The feds do not get to decide how much losses the taxpayers are willing to pay. Its a judgment for the treasury and congress, but that would be the other thing they can be done. Relax the credit terms a bit, but in doing that, recognize there will be more losses to the program. I understand why those are tough judgments to make. That would be a couple of things that could happen that would get more take up. We have a question from if you are. Theres a lot of uncertainty in the economy in the job market. What would you say to the average american, not the corporate ceo, about how to manage right now . How to think about retirement . How to think about saving for the future . So, i spent most weeks talking to lots of people and take a lot of phone calls from people who are worried about their careers and jobs and who have lost their job. If youve lost her job, make sure you are aware of the Unemployment Benefits and other benefits that are available to you. Ive talked a number of people, and if you are a younger person who is still in school, make sure that you are working on improving their education, your Educational Attainment and what jobs are out there, so your skill set is going to address the opportunities. For many of my conversations are with local officials, heads of junior colleges, local businesses and local leaders where we are talking about beefing up as much as possible skill training programs, which by the way, because of the pandemic, people cannot do in person. They have to do remotely. We are involved in lots of conversations. My advice is that money is well spent money and we need to beef up those programs. But for individuals who are going through this hardship, the i would say this crisis will eventually come to an end and the thing to do is to take it one day at a time, make sure, if you are unemployed, get your benefits. If you have a job, hang in there. This is not going to go on forever, but be prepared on the other hand, it can go on for longer than people think, not just in 2020, but part, where a good part of 2021 until there is a vaccine or until we do a better job following Health Care Protocols to make sure we are managing this pandemic. The last suggestion to anybody i talked to is, where your mask. Wearing masks, over and over again. Another question with Bloomberg News and the houston borough. You say that the fed will eventually need to show restraint and pull back its emergency measures. You also say that we need to then close the gap between minority Unemployment Rates and the overall rate. Where do these two converge . Do you hold off pulling back on fed measures until we have reached a certain level in the gap between minority and overall Unemployment Rates . Well, so, as we judge, there are sunset dates for the 13 three programs. Then the question is, what will i be looking at to judge how much restraint we should show or whether we should continue on these programs. To your questioners point, i will be looking at the overall Unemployment Rate, i will look at an Unemployment Rate among blacks, hispanics, every group, i will be looking at that u6 measure i mentioned. I will have to be convinced that we are on our way to growing employment at a healthy rate and getting down this Unemployment Rate. A big part of whether im seeing that, my guess, is going to have a lot more to do with the advance of the virus and how well we are following Health Care Protocols. I will be looking at all of that. I will not be an advocate of prematurely withdrawing these programs. Im going to want to see that we are getting this virus under control, that we are seeing sustained and healthy growth in the workforce and im going to want to see a number of those issues addressed before i would want to talk about showing restraint. I am not seeing those issues. Im not seeing that yet. Just a followup on that point. Before the pandemic, we often had the black Unemployment Rate being Something Like double the white Unemployment Rate on a regular basis. When making that determination of whether our economy is on its pathway to a good recovery, is that still going to be acceptable or do we really need to have that gap the smaller . I think we are going to need to have that gap we smaller. It is gasped out right now. I want to see forward progress and i want to have confidence that we are growing fast enough and we are making enough progress that we are seeing, not only that gap cut smaller, what i want to see better visibility that it will continue to get smaller and improve. As i said, im not seen that yet, but at a certain point, im hopeful we will see it. I think part of seeing the gap gets smaller is going to be much better performance in managing the virus. Are there any metrics attached to how you are going to make that determination . Or your fed colleagues on board with the . I think, at the dallas fed, but i think across the system, we have been watching very carefully. The Unemployment Rate and Participation Rates of underrepresented groups. Yes, we have a number of metrics that we watch and have spent a lot of time in the Community Talking to contacts. Yes, there are a whole range of variables and it ultimately comes down to judgment. Yes, there is good consensus within the fed that these underrepresented groups, we need to see improvement. The mark of a healthy economy will be seeing improvement in a lot of these measures related to underperformance of underrepresented groups. Mark just loves you to death. He has a couple more questions for you. In the past, the approach of a general election might have been seen as the principal source of uncertainty for the economy. How do you rate this upcoming election as a source of uncertainty this year . Does it even rate with the Economic Cycle and covid19 being so impactful . So, its not surprising you will hear me not comment at all on politics where the election. I would say, from me, right now, consistent with my other comments, the path of the virus and how well we are managing hospitalizations, incidents of the virus, and muting its transmission overshadows a number of other issues we would be normally thinking more about. For me, the forefront of Economic Policy right now and Economic Uncertainty has to do with the virus and how will we are doing executing Health Care Protocols that will allow the transmission of the virus. That is front and center for me. Mark also asked you, you talked about Infrastructure Spending earlier. Its now an ideal time for the federal government to spend or invest in that area, and that Interest Rates are back to historic lows. Are there particular methods of financing shot spending to minimize the impacts on the federal budget and should it include a broadband for rural areas or is that ideally a function of private investment . So, to your point, it is our estimate at the dallas fed that the u. S. Is approximately three trillion dollars under invested in infrastructure. That includes roads, bridges, as mark mentioned, it also includes wifi and access to wifi in a number of communities. China, by contrast, you think is likely over invested in infrastructure. We think we are under invested. One of the positives that comes with rates this low is, yes, we can finance long Line Investment at low rates. Some of it can be done by the private sector, some of these projects, like certain roads might be revenue producing. Some of them, yes, have to be done by the government or a partnership between the governor and the private sector. I think it is a significant opportunity and it opportunity to help create jobs, grow faster but, in turn, it will also improve productivity in the United States and help us grow faster. So i think it is a big opportunity. The timing of it is not going to be a significant it until we have broken the back of this virus and pandemic. As we are doing and we are on our way to growing out of this, and we have elevated levels of unemployment, i can see where Infrastructure Spending would be one of several very appropriate actions that we can be taking on the fiscal side. A lot of it, as was mentioned, could be done with private, money not just government money. He also says, as you know, woman, blacks, hispanics and Young Workers have seen heightened levels of unemployment as of late. Is the current downturn exacerbating income inequality and will it take years to recover from those impacts, as was the case with the Great Recession . Unfortunately, the answer to the question is yes based on the work we are doing. We think likely when you are seeing a gap increase between black, hispanic unemployment and the overall Unemployment Rate, what goes along with that is more income inequality, more wealth inequality and that gap does not serve us well. Again, we have 46 million workers in his country that have a High School Education or lower out of 160 million person workforce. Again, the fastestgrowing demographic groups in this country are blacks and hispanics. To the extent that they have better education attainment. They do better in their careers. We will have faster workforce growth and we will have faster productivity growth and faster gdp growth. I think for those groups to underperform hurts all of us and makes gdp growth slower than it would be otherwise. So, we have to address this. Yes, this Current Crisis has made these issues wears. We are making progress in a couple of years leading up to this crisis and unfortunately, we have taken a step back and we have to address it. What tools does the fed have in particular to address these things . I understand a lot of this has to do with fiscal policy. What tools do all have to address these things . So, going into this crisis, one tool we had, because inflation has been muted, that is for the last several years, we were willing to run the economy powder. I saw evidence that underrepresented groups were being pulled into the workforce and the longer and they stayed in the workforce, we could help close that gap. The other thing, other tool and so we will have to keep that experience in mind again is we are going through this crisis in that i think we are going to want to see those underrepresented groups get back more fully representative in the workforce. The other tool we have had, most of the Federal Reserve banks and the 11th district, my district is a good example. We have spent an enormous amount of time out in the community as a convenor and a catalyst for programs that have helped early literacy, educational tame in, particularly for underrepresented groups and skills training. Its more than just jobs, we do research. We have the credibility to do it and we have been a catalyst for seeing those issues addressed, including getting wifi into areas that did not have wifi. We have done that being a catalyst, again, for local leaders, businesspeople. I think it is critical that the fed and me as a fed president continue aggressively to play that role in my communities. What do you need congress to do now . I think congress has done a lot up to now with all of the different legislation in programs. Again, i go back to what i mentioned earlier. I can see Unemployment Benefits are going to need to be extended, all the way i understand, likely restructured. Maybe to create more incentives to work, but they need to be extended. I think again, aiding to state and local governments and municipalities that are at the forefront in fighting this pandemic. Without some relief, budget relief, they are going to need to make cutbacks that the worst possible time while they are trying to do their job and we are trying to grow the economy. Donna has another question. You have served on the board of bed, bath and beyond which recently announced it is closing most of its rick and mortar stores. We have heard the story a lot lately. What do you see as the future of retail and how it will affect the economy overall . So, for better or worse, there is no question that Online Retailing has made it harder for brick and mortar retailers to tap Pricing Power and to be able to gain market share and i would say this crisis has probably accelerated that trend. Meaning, a lot of people, maybe including me, would go in a store would prefer to go into a store but because of this pandemic people have never tried buying things online have now tried it i have found that it works pretty well and so my guess is this is going to make it more likely that story, is this going to be fewer retail stores, thats going to be a smaller amount of retail space. There will be fewer malls we already in our analysis over stored in the United States in retail versus most of the country, and so there is going to be a restructuring in any event before this crisis. This is going to accelerate that restructuring and make it more likely that there will be fewer stores, less retail space, and less employment, at least at the retail level, of people who work in stores, and i think that credible accelerate as a result of this. Well, mr. Kaplan, thank you so much for joining us today, and thank you to all of our viewers for paying attention to this live stream. Mr. Kaplan, next time i hope we can meet in person so we can give you the press club mug which we usually do, but thank you so much for doing this virtual news makers with that. We hope you have a good and safe rest of your week. All right, thank, you kimberley, and thank you for having me. And everybody, wear a mask. Everybody wear a mask. Live now to newcastle delaware to hear remarks from president ial candidate joe biden and his plan to help the u. S. Economy recover from the pandemic
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