In response to the coronavirus pandemic, many state and local governments have shut down restaurants and other businesses, and some have issued orders for people to stay home. These measures will eventually suppress the virus but come at a huge cost to the economy. Forecasters expect gross domestic product to fall by as much as 30% in the second quarter, a much steeper drop than ever happened during the Great Recession. Jobless claims will be in the millions.
President Donald Trump, seeing these economic costs, has declared that he wants the shutdowns ended by Easter (April 12). In a recent briefing, Trump declared that the U.S. “will be back in business pretty soon,” and that the country “wasn’t built to be shut down.”
A small handful of commentators have expressed similar sentiments. Former Goldman Sachs Chief Executive Officer Lloyd Blankfein has called for many workers to return to their jobs after “a very few weeks.” Longtime Republican policy advisers Arthur Laffer and Stephen Moore have made similar recommendations.
Trump, obviously, is taking these calls seriously. But his plan to reopen by Easter would only make matters worse.
True, Trump doesn’t have the authority to rescind the shutdowns and shelter-in-place orders that state and local government have issued, but he could push the Centers for Disease Control to advise reopening businesses by Easter. Some Republican governors, mayors and state legislatures might follow Trump’s advice and reopen.
This not only would be a huge mistake, it probably would be ineffective. As my colleague Michael Strain points out, letting people go back to work now wouldn’t simply restore the economy to its former health. The disease would come roaring right back. Infections would soar in city after city, overwhelming the health-care system. Mass panic would be enough to keep people huddled in their homes, possibly for months, causing restaurants, stores and other businesses to go bankrupt anyway. The economy would still take a huge hit, but now many more people would die.
How many people? It’s hard to say, but the numbers might be large. The website covidactnow.org, which has been endorsed by a number of public-health experts, suggests that the death toll without shelter-in-place orders will be in the millions. That’s in line with the predictions made by a group of British experts at Imperial College London. The reasoning is that as caseloads rise and hospitals are swamped, access to crucial life-saving therapies such as mechanical ventilators and antibiotics (to fight secondary infections) will halt, sending the death rate — which with proper treatment is probably about 1.3% — soaring.
Some have attempted to put a price tag on this death toll, using figures of as much as $10 million per life. There have also been suggestions to use quality-adjusted life years, which would reduce the cost estimate because most of the people who die of coronavirus tend to be older. But this sort of cold calculation — which in a twist resembles the “death panels” that conservatives have warned would be a result of socialized medicine — leaves out a number of important aspects of the question.
First, it’s not clear that societies actually value lives at a certain dollar amount when making decisions. The sweeping response to terrorism, or the strict safety regulations for air travel, have garnered substantial public support despite probably not being able to pass this sort of cost-benefit calculation in terms of lives saved.
Second, these calculations tend to be very good at estimating economic numbers but bad at anticipating human costs. Even if coronavirus doesn’t kill you, it can do lasting damage to your lungs. This sort of permanent injury could be incorporated into cost-benefit models, but it often isn’t. And then there’s the small but real possibility that if left unchecked, the virus could mutate into a much deadlier form, as the Spanish flu of 1918-19 may have during its catastrophic second wave. Economists have long known that so-called tail risks such as these should loom large in cost-benefit analyses, but somehow this fact rarely makes it into pundits’ back-of-the-envelope calculations.
For all of these reasons, most economists themselves have not been recommending an end to shutdowns. Instead, they have urged the federal government to broaden its economic support for businesses and households.
So how long will shutdowns last? China’s lockdowns began reducing new infections after a few days and cut infections to a relatively low level after about three weeks. But confirmed cases tended to lag true infections by one to two weeks. So it will probably be almost two more weeks before the U.S. can know if its much less restrictive shutdowns are having a similar effect, and a month or more before Americans can start coming out of their houses. Because shelter-in-place orders have only been in effect for a few days, this means Easter is probably at least two weeks too soon.
Furthermore, Americans won’t be able to come out of their houses safely until their cities and states have test-and-trace programs in place. These are the systems successfully used by South Korea and other countries to suppress viral outbreaks quickly. They require a big investment in widespread symptom screening, large-scale rapid testing, contact tracing and strict isolation of infected individuals.
Test-and-trace systems can work in the U.S., but they will take a lot of investment and concerted government action to put in place. If the Trump administration wants to get Americans back to work as quickly as possible, it should focus on developing high-quality testing systems in every city and state during the next month. Otherwise, the country could be in and out of shutdown for a very long time, and the economic collapse will drag on longer than it otherwise would. – Bloomberg