There are times when economics should take a back seat to other considerations and today is one of those times.
We hear from many quarters that we can’t shut the economy down, that closing the economy down will cause more damage than the pandemic. This is not true.
By March 1, deaths in the U.S. are projected to be between 439,000 thousand (if masks are worn) and 587,000 (if masks are not worn). By contrast, closing the economy down from the beginning would have been economically damaging, but not costly in terms of human life.
The reason for our failure to act, was that the Trump administration worried too much about how efforts to address the virus would impact on the economy. President Donald Trump touted low unemployment rates and a surging stock market as proof that his presidency was good for the economy and the reason the nation should give him a second term. Fearing the impact of a shutdown, he did nothing for too long.
Contrast our lack of action with the response shown by the government in Taiwan. Taiwan immediately started testing, contact tracing and isolating individuals who may have had contact with anyone who could be exposed. They quickly produced personal protective equipment, mandated masks, enforced social distancing, and they were transparent telling Taiwanese residents about the virus and its effects.
As a result of their quick action, community spread was not a problem and an economic lock down was not needed. How successful was the Taiwanese government? To this date they have suffered only 584 cases and seven deaths. If we had followed Taiwan’s example, total deaths in the U.S. could have been 100, not 242,000.
By not taking action at the federal level and instead relying on a state-by-state approach, the Trump administration allowed the virus to spread nationwide. As a result, the lock down that Taiwan avoided is now the only way we’re going to get a handle on the virus.
The silver lining, to the extent that there is one, is that whatever lockdown we undertake need not be nationwide. Essentially, we’re only talking about closing gyms, bars, restaurants and entertainment venues – any activity that would result in the close contact of large numbers of individuals.
Proponents of a partial lockdown correctly argue that the resulting economic damage will be far less than the impact of an uncontrolled virus. Fiscal and monetary policy actions can compensate for lost income. Death on the other hand is forever.
One reason Congress hasn’t acted is that most members of Congress still believe the government needs to borrow or tax before they can spend for any reason. It’s their opinion, that the government simply doesn’t have enough money to get the job done.
For other members of Congress, admitting that they have the power to offset the economic losses from a partial shutdown would force them to admit that their claims that budget deficits and debt is not only wrong but counterproductive, and that they knowingly allowed the virus to spread.
Proof that we can handle the economic impact of a partial lockdown can be seen in the impact of the CARES Act. The passage of the CARES Act (and three other bills) funded programs that provided $3 trillion in economic support overall. The fiscal aid gave vital support to businesses, nonprofits and households, supporting incomes and contributed to a sharp increase in household saving.
Did the CARES Act reduce unemployment? No, because we maintained the lockdown in the food and entertainment sectors, but we offset the income consequences of the lockdown with the CARES Act, and we could have continued that assistance if we had passed the HEROS Act.
The first test of whether a rational public health policy can supercede economic self-interest will come in Texas. El Paso County Judge Ricardo Samaniego has extended an order to shut down of all nonessential services until Dec. 1 to curb the spread of COVID-19. At the same time, a group of 10 El Paso restaurant operators and the Texas Attorney General’s Office is requesting a temporary injunction to stop El Paso County Judge Ricardo Samaniego’s order.
If that economic argument prevails, El Paso (which is close to being the epicenter of the pandemic) will have no chance of curtailing the outbreak. On the other hand, if we set aside the argument that the only thing that matters is the economy, we stand a chance to finally do what nations like New Zealand, Taiwan and South Korea did months ago when they chose heath over economics and ended the pandemic in their countries.