COVID-19: Saving lives or livelihoods?

  • A postal worker wears a protective mask in New York City on April 6. Bloomberg photo by Jeenah Moon

Published: 5/24/2020 6:00:06 PM

This column is about an awful choice our country faces in light of the COVID-19 pandemic: Should we risk the lives of hundreds of thousands of Americans by reopening the economy too soon or risk the livelihood of tens of millions of Americans by opening the economy too late?

Any choices that are made will be in the context of multiple unknowns about the virus itself and about restarting an economy that was shut down as a result of a worldwide natural disaster. There will be great suffering either way.

The carnage in lives lost to this virus is horrendous. In Massachusetts alone the death toll was over 6,100 as of Friday. Even so, my opinion is that restarting the economy is a less bad option than waiting for the virus to be more thoroughly contained.

Here are my reasons:

1. The eight-week total of those filing unemployment claims nationwide is 36.5 million. Added to the 7.1 million who were already unemployed, the unemployment rate is actually over 25%. According to the Washington Post, the official government tally hasn’t yet caught up with the actual picture. In Massachusetts, about 1 million residents have filed for unemployment benefits since March.

It may get worse. According to the Federal Reserve Bank of St Louis, the jobless rate may reach 30%. That is higher than the unemployment rate of the Great Depression, which was 25% when Franklin Roosevelt became president.

2. The unemployed, underemployed and soon-to-be unemployed, and graduates seeking their first job cannot wait for the pandemic to be totally under control.Consider these facts:Dr Anthony Fauci does not anticipate a vaccine for 18 months, at least. Production capacity will be a major holdup in manufacturing the vaccine and inoculating every American. Some experts say that COVID-19 may periodically resurge for two years. About 200 million Americans would need to infected by the virus to reach the level of “herd immunity.” Even with that, there are conflicting opinions among experts whether herd immunity applies to the COVID-19 virus.

3. Just as we don’t know how long the pandemic will last, we also don’t know how quickly or completely the economy will recover. “There will likely be no quick recovery. A key question is whether damage to the economy’s capacity to produce goods and services will be long lasting,” a report from The Brooking Institute said. Comparing the current crisis to the Great Recession, the report said, “Despite the fiscal stimulus of the American Recovery and Reinvestment Act of 2009 and all the efforts of the Federal Reserve, it took six years for per capita Gross Domestic Product to return to 2007 levels, and real GDP is still well below pre-recession projections.”

According to Axios, economic experts including Fed chair Jerome Powell and the International Monetary Fund chief economist Gita Gopinath said that “... a quick recovery for the US economy is a ‘fantasy’ and likely at least a year away.”

4. The Congressional Budget Office says that the federal budget deficit will be nearly $4 trillion in 2020. To put that in perspective, 50 cents of every dollar the federal government currently spends is borrowed. The Federal Reserve has committed itself to do “whatever it takes” to buttress the economy. It is already taking unprecedented risks for which a central banking system was not designed. Current levels of federal government spending and Federal Reserve’s monetary policy cannot go on forever.

5. Lacking income and sales tax revenue, state and local governments may not have sufficient financial resources to pay for essential services like public hospitals, ambulances, sanitation and water treatment. Budgets for police, firefighting and education will be severely strained. This situation is so serious that House Democrats are advocating a $1 trillion program to support failing state and local government budgets.

6. With notable exceptions like meat packing plants, employers are taking steps to make their workplaces safer than they were prior to the pandemic. Therefore, employees are less likely to become infected at work and then spread the virus outside the workplace.

7. Unemployment itself can be a cause of dealth. In the largest study of its kind on mortality patterns in Europe and the United States, a Yale researcher has found a direct correlation between unemployment and mortality. A joint study by at Drexel University and the University of Michigan stated that “ ... job loss is associated with a 73 percent increase in the probability of death”

8. There is a significant risk of deflation (that means reduction of the general level of prices in an economy. It is the opposite of inflation). Because of the rational expectation that items will be cheaper a bit down the road, consumers might be inclined to delay purchases. One economist described the potential consequences: “That can lead to a toxic cycle in which lower spending prompts businesses to cut wages, further pushing down consumer purchases and prices. Deflation also can make it harder to repay mortgages and other debt, which become costlier in inflation-adjusted terms. The economy can get stuck in a rut, similar to the “lost decade” that battered Japan in the 1990s.”

Whatever your own preferences are, it is important to recognize that Americans in different circumstances are likely to have different priorities. For example, people who can work from home or receive a pension check still have an income. For them, the health aspect of the crisis may be more important. On the other hand, those whose job is at risk or their business faces bankruptcy may be more worried about their financial peril. Those who have jobs that put them in contact with the public may be worried about losing both their health, then their job.

The considerations of various age groups are also not the same. For example, young people may be more concerned about jobs, career, fun and romance. Senior citizens may be more concerned about getting sick and dying. To complicate the situation further, various ethnic groups, employment types and geographies have been impacted differently.

No matter what decisions are made, illness and death will continue. Unemployment and financial distress will continue.

Tens of millions of Americans will continue to suffer, albeit some will suffer more or in different ways than others.

Richard Fein’s purpose in writing his columns is to promote civil discourse on topics of public interest. Richard holds a Master of Arts degree in Political Science and an MBA in Economics. He can be reached at columnist@gazettenet.com.


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