Most economists agree: Reopening the nation — and the economy — too soon will exacerbate what is already a public health disaster.
(CN) — One month after President Donald Trump declared the spread of coronavirus in the U.S. a national emergency, policymakers are weighing how soon social-distancing restrictions should be relaxed to stimulate economic activity.
Many economists, however, continue to prescribe a slow return to work guided by public health experts.
“There’s no tension between good social distancing measures and long-run economic outcomes,” said Heidi Shierholz, senior economist at the Economic Policy Institute in Washington D.C. “As an economist, I will step back and say follow public health experts for guidance on when to reopen the economy.”
Even as Goldman Sachs calculates unemployment in the U.S. could reach 15% in the third quarter and average 7.1% in 2021, the investment firm is also looking for the light at the end of the tunnel.
“If policymakers ﬁll in the remaining holes on macro policy and manage to thread the needle between continued virus control and a gradual reopening of the economy, the level of GDP should begin to move higher in May/June,” said Jan Hatzius, chief economist of Goldman Sachs, in a statement.
One recent outbreak at a Colorado meatpacking plant exemplifies the difficulties of this balancing act. Two workers at the JBS plant in Greeley have died from Covid-19, while 50 others have tested positive and the plant’s other 6,000 workers are now under quarantine.
“Talk is cheap — workers’ lives are not,” wrote Kim Cordova, United Food and Commercial Workers Local 7 Union President, in a letter asking the plant to provide hazard pay and personal protection equipment. “We fully understand the seriousness of a plant closure and its economic impact. However, safety must take precedence over profits.”
Since closing, JBS pledged to spend $1 million to test all employees and deep-clean the facility, which it hopes to reopen April 24.
“Colorado’s beef industry is a critical part of our state’s economy, which is why we continue working closely with the Weld County Public Health Department to ensure the safety of the JBS workers and get the plant open as soon as is safe in order to protect the food supply,” said Colorado Governor Jared Polis at a news conference.
Many people nevertheless wonder how much the market shutdowns cost and how long they can last.
One back-of-the-envelope estimate published by Duke Law’s Global Financial Markets Center compares income, education and international commerce across U.S. counties. The center roughly calculates gross domestic product drops an average of 5% each month the restrictions remain in place.
“We show how as long as the shutdown is not too long, we should be able to weather the storm,” said study co-author Christos Makridis, a research assistant professor at the W. P. Carey School of Business at Arizona State University. “I am eager and confident that we are in the process of a turnaround.”
He added: “It’s important to not discount the significant economic losses, especially in areas that are not quite as much at risk of contagion.”
Over the past three weeks, 16.8 million Americans filed new claims for benefits — about 5% of the total population. Additional analysis from Janet Yellen, the former chair of the Federal Reserve, predicts the U.S. economy will shrink at a 30% annual rate over the second quarter.
Benjamin R. Page, a senior fellow at the Urban-Brookings Tax Policy Center, believe the economy would have taken a hit even if government did nothing.
“Some people blame the official restrictions, the shutting down of our economic activities and gathering places for the economic difficulties, but those things would have happened anyway,” Page said. “With many more people getting sick and dying, people would stop going to the restaurant all by themselves.
“Those restrictions should really be making things better in the long run, not worse,” he added.
Without downplaying the earth-shattering economic side effects of the pandemic, many economists argue social distancing now saves both lives and money in the long run. One recent cost-benefit analysis conducted by researchers at the Massachusetts Institute of Technology connected speedy economic recovery with strict public health policy during the 1918 Spanish flu pandemic.
Another analysis conducted by a University of Oklahoma researcher compared the costs of taking a Laissez-faire approach to economic policy during the Covid-19 pandemic, versus strict applications of social distancing to slow the spread. Estimating the worth of each American life at $3 million to $10 million, the model found the do-nothing approach is only effective if the disease’s fatality rate is below 0.15%.
Precise mortality rates cannot be calculated accurately until the pandemic is over. But a look at the Johns Hopkins University & Medicine coronavirus tracker indicates the mortality rate both globally and in the United States will likely be well above 0.15%.
“We should consider social distancing as an investment,” explained one researcher familiar with the paper. “Even if the number of infections and deaths seems relatively low now, bearing the costs of social distancing now helps save lives in the future.”
Some business owners think consumers will drive economic recovery more than government pressure.
“Early indicators are that consumers are scared, and some workers don’t want to go back to work because they’re so scared,” said Kristen Blessman, president of the Colorado Women’s Chamber of Commerce. “How do you social distance restaurants? How do you social distance a hair salon? Because we already know that that’s going to be a lasting impact.”
Regardless of when social distancing restrictions lift, researchers at the Center on Budget and Policy Priorities in Washington cautioned in a Monday report against working to meet a calendar deadline particularly for determining when to end the lifelines. Instead, the think tank argues U.S. economic policy should be measured by public health and shaped by economic indicators.
“The legislation enacted so far in this health and economic crisis contains significant measures to address hardship and economic disruption, but they all end on arbitrary dates, and almost certainly too soon,” the report said.
Aid provided in the $2 trillion CARES Act will run out before the country has recovered. Although some financial assistance will last through the end of the year, the $600 bonuses added to unemployment insurance benefits are set to expire at the end of July. The $1,200 stimulus checks currently being distributed among Americans will not last long either — and in many states aren’t enough to pay even one month’s rent or mortgage.
Everyone wants to return to work, but few are willing to expend the lives of their customers and workers to get there quicker.
“I am a member of this community first, the community that is Denver, Colorado state, the world. My first concern is there; that we do the right thing to minimize the public health impact,” said Jeremy Bronson, president of Occasions Catering in Denver, which celebrated its 50th anniversary in February.
Ultimately the company furloughed several employees, cut overhead, and applied for assistance from the federal Paycheck Protection Program. But Bronson is also reimagining how to run the business both in the now and the long run.
With stay-at-home orders preventing large-scale events, Occasions pivoted to produce family-size gourmet frozen dinners and donates a chunk of proceeds to local nonprofits.
“In our case, we’ve been asking the question: what have you always wanted to change about the way we do business, but never had time to make those changes?” Bronson said, looking to the future. “This is one of the few reset opportunities where a busy entrepreneur gets to sit back and think, OK, I can actually change something that’s been bugging me forever and create a better customer experience.”