MNI POLICY:US Can Rebound Nearly 100% if Covid Tamed- Goolsbee

The U.S. economy could quickly return to almost regular levels of activity once Covid-19 is brought under control through a vaccine or strict health rules, and without that Congress may be forced to continue trillion-dollar rescues, former Council of Economic Advisers Chair Austan Goolsbee said Monday.

"If they said oh actually the vaccine is available on Monday and everyone can get it, I kind of think the economy can almost literally just go right back to where it was before this began," he said at a conference hosted by Federal Reserve Bank of Chicago, where he teaches at the Booth School of Business.

Other nations like South Korea and Japan have already proved that you don't need a vaccine to achieve a substantial victory against the pandemic, he said. Goolsbee said research also shows the main reason Americans stopped going to stores wasn't lockdowns but fear of getting the virus while going out, citing tracking of store visits across districts with different health rules and signs people shifted trips to smaller and less crowded stores.

"The best thing you can do for the economy is slow the spread of the virus," said the former adviser to President Barack Obama and an adviser to the New York Fed.

"It's been great that we've had an unprecedented rebound, but it wasn't enough, not even close, and now if we get this third wave as bad as it looks so far, and especially here in our region, I'm really quite nervous what that would mean for the economy," he said.

TRILLION DOLLAR RUN RATE

Most of the costly damage to the economy and to the federal budget will be done in peak phases of the virus, he said, so clamping down on the current wave is vital.

"This third wave, second wave, whatever you want to call this wave, has immense potential to radically undermine the recovery," he said.

"So this thing that it costs a trillion dollars every six to nine months, that's the run rate of life support for the biggest economy in the world," he said. "So if policy makers do not put the focus on slowing the rate of spread of the virus, we are going to pay, we're just going to have to pay a lot more and in the form of rescue and relief."

Goolsbee spoke in a session with Chicago Fed Research Director Anna Paulson, who said that, "left unaddressed, the destruction from the pandemic is likely to leave long lasting scars and represents a strong headwind to an inclusive recovery."