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On Thursday, the U.S. Labor Department reported that 3.3 million Americans filed initial jobless claims, a record in more than 50 years of data and more than four times the previous record.
It’s a sign of how the stay-at-home orders that 21 states will have in place by the end of this week represent a blunt instrument, which may help keep the coronavirus from spreading but is also pounding the economy in unprecedented ways.
Some Americans are chafing already at the restrictions – not least of them President Donald Trump, who this week suggested lifting restrictions at least partially by Easter on April 12 to start revving up the economy. And some economists are also calling for a return-to-work timetable to protect the economy from long-term damage.
Still, the recent focus on containing the spread of the COVID-19 disease could be key to limiting the ultimate costs both to the economy and to human lives.
“We have to stop the threat of this epidemic,” says Sherry Glied, a health economist at New York University. “There’s no point rebuilding while the bombs are still dropping.”
Some Americans are beginning to chafe under the coronavirus restrictions that authorities have put into place – not least of them President Donald Trump, who this week suggested lifting restrictions at least partially by Easter on April 12 to start revving up the economy.
It’s an ambitious timetable and, to many, a callous one. How dare a president, or anyone, put the health of the economy ahead of the safety of citizens? But the president’s statement highlights another reality that conservatives especially have been grumbling about: The extraordinary stay-at-home orders that 21 states will have in place by the end of this week represent a blunt instrument, which may keep the virus from spreading but is also pounding the economy in unprecedented ways.
The latest evidence came Thursday, when the U.S. Labor Department reported that 3.3 million Americans filed initial jobless claims last week, a record in more than 50 years of data and more than four times the previous record.
A recession is likely, if not already underway. The restrictions on the economy are so far-reaching that businesses have been forced to close, throwing millions out of work, and keeping consumers, a mainstay of the economy, from shopping.
Editor’s note: As a public service, all our coronavirus coverage is free. No paywall.
Some analysts are predicting that economic activity could shrink by up to a quarter this spring, a terrifying drop that, were there no recovery the rest of the year, would mean economic dislocation on a scale that would outstrip any single year of the Great Depression.
To many experts, the question is not really if authorities will ease the restrictions, but when. In theory, the sooner that happens, the less damage the economy will sustain. But there’s a big caveat. The recent focus on containing the spread of the COVID-19 disease could be key to both limiting the ultimate costs both to the economy and to human lives – including the risk of hospital systems becoming overwhelmed with patients. For now, that focus on containment remains paramount, many say.
“We will get to a moment where there will be [only] so much risk we have to be willing to take, but right now we’re not in that world,” says Sherry Glied, a health economist and dean of New York University’s Wagner Graduate School of Public Service. “We have to stop the threat of this epidemic,” she adds. “There’s no point rebuilding while the bombs are still dropping.”
In her view, it makes sense to wait for progress on the scientific front, and for the government to be planning now for how it will reopen the economy in the future, while also making sure basic needs like food and housing are met.
Already, nations including Denmark and Britain are trying to cap economic damage by covering a large chunk of worker salaries for businesses that have seen revenues plunge. A $2 trillion relief package moving through Congress Thursday, similarly, throws a lifeline to businesses (loans) and workers (cash payments and stepped-up jobless benefits).
In weighing how and when to reopen the economy, part of the conundrum is that no one has fully quantified the risks posed by the virus.
“We don’t have that data,” says Howard Markel, a medical doctor and professor of the history of medicine at the University of Michigan’s School of Public Health. The number of reported deaths has triggered alarm in the medical community and suggests that this virus is several times more deadly than a more typical seasonal flu. But public health officials have not been able to establish a concrete fatality rate because testing limitations have made it difficult to get a handle on the number of individuals who have become infected and recovered. When will health authorities have a handle on those numbers? “My hope is two to four weeks,” Dr. Markel says.
It’s such timetables that make Mr. Trump’s Easter deadline, just over two weeks away, look unrealistic.
Even with the data in hand, health authorities would have to determine the best ways to ease restrictions. Should they target only hard-hit regions? Or is it better to focus on sheltering the elderly and those diagnosed with other diseases?
“Real damage to people’s lives”
According to the Johns Hopkins Coronavirus Resource Center, the U.S. has become the global epicenter of the pandemic with nearly 86,000 confirmed cases, more than any other nation.
With the House of Representatives taking up the $2 trillion Senate-passed rescue bill, health authorities have some breathing room to determine the best ways to keep the population safe.
The economy can accept a certain amount of risk, and cost-benefit analyses are made routinely, points out Vivian Ho, an economics professor at Rice University and a professor at Baylor College of Medicine, both in Houston. “It’s a tough exercise in this particular situation, but someone needs to put those numbers down. We need to start thinking of maybe we should not shut everything down.”
“You’re talking about real damage to people’s lives, to the 30 million small businesses in America,” says Chris Edwards, director of tax policy studies at the Cato Institute, a libertarian think tank in Washington. “People’s lives and dreams are in these small businesses and in their careers. And some of them could be ruined permanently.”
Already, some Americans are beginning to push back on the restrictions, such as by holding social gatherings. A Louisiana pastor continues to defy Louisiana’s ban on gatherings of more than 50 by busing in attendees from five different parishes (counties) for Sunday services with what he claims are up to 1,000 people.
In Texas, public officials have begun to complain openly about the restrictions.
“My message is: Let’s get back to work. Let’s get back to living,” Lt. Gov. Dan Patrick told Fox News in an interview Monday. “Let’s be smart about it … but don’t sacrifice the country. Don’t do that. Don’t sacrifice the American dream.”
In Harris County, home to Houston, Republican state Sen. Paul Bettencourt warned that a stay-at-home order restricting business would be “economically calamitous.”
There’s no real precedent for the economic threat now facing the U.S. The Spanish flu of 1918 occurred in a far different context. The country was coming off a war footing. Restrictions were limited to certain cities.
Even comparisons to sudden recent economic disasters like 9/11 and the 2008 financial crisis are off base, says Jonathan Bydlak, director of the Fiscal and Budget Policy Project at the R Street Institute, a free-market think tank in Washington. “We’re dealing with a very unique situation, and there’s not a whole lot in economics books that teach you how to deal with these situations.”
Dangers in reopening too quickly
Nevertheless, many economists continue to stress the importance of taming the virus first before tackling the economy.
“I think the first order of business will be to get the spread of the virus under control, and then resume economic activity,” Federal Reserve Chairman Jerome Powell told NBC’s “Today” show Thursday.
While not opposing that sequence, two high-profile economists called on Monday for a timetable to avoid letting the economy die of neglect.
A quarter of all workers should be back on their jobs within two months, and 75% of workers within four months, wrote Nobel Prize winner Paul Romer and Alan Garber, a physician and economist at Harvard University, in a New York Times opinion column. The return to work would be coupled with ramped-up testing and widespread use of protective gear by workers, which they said should limit the spread of the virus.
Still, even from a strictly economic point of view, trying to reopen the economy before virus cases have spiked could lead to a longer disruption.
“We’re not anywhere near a flattening of the curve” of infection, says Joe Brusuelas, chief economist of RSM US LLP, part of a global network of independent audit, tax, and consulting firms. “Should we move prematurely, it could risk the general spread of the disease that would require subsequent shutdowns.”
Editor’s note: This story has been updated to reflect the number of cases in the United States surpassing all other nations.
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