Hollstadt Consulting CEO Molly Jungbauer has had to let go 30 of the 150 employees at her St Paul, Minnesota firm to weather the drop in revenue from travel industry clients because of the coronavirus.
She’s worried about her daughter, who lives in New York and has the disease. But she also worries that shutting the economy with open-ended stay-at-home orders could have an “irreversible” impact.
So she was relieved to hear Minnesota Governor Tim Walz’s plan last week: clamp down on commerce and social activity now but then reopen the state for business by May 4. “It is nice to know that we have somewhat of an end date,” she said.
Coronavirus shutdowns could lop 25% or more from US output, some economists forecast, throwing tens of millions of Americans out of work. The US government and the Fed are mounting what could be a US$6 trillion economic rescue.
And elected US politicians entrusted with public welfare are making calculations centred around the question: How many possibly preventable deaths are acceptable, as weighed against millions of jobs lost and trillions of dollars of economic output foregone?
Declaring the cure can’t be worse than the disease, President Donald Trump has said that by April 12, he wanted churches all over the country to be “packed” with Easter celebrants. On Sunday, Trump backed away from that goal by extending social distancing guidelines to April 30.
More testing is critical, Trump advisor Stephen Moore told Reuters.
“Once you have testing you can open up the economy,” he said. South Korea has tested a much bigger portion of its citizens than the United States has, allowing it to reduce infections and without stopping its economy. The US has ramped up its capacity in recent weeks, though some states are making bigger inroads than others.
Also key, Moore said, is understanding if new cases are rising as fast in the Midwest as on the coasts, and if more people can, like the hundreds of thousands of workers at FedEx still on the job, practice social distancing and still work.
“You kind of have to look at the businesses that are running,” Moore said.
Buckle up, Minnesota
US state and local officials are doing their own calculus.
“We will not put a dollar figure on human lives,” New York Governor Andrew Cuomo said. Almost half of the 130,000 US cases to date have appeared in New York, where some hospitals are overwhelmed with critically-ill patients.
Other governors in states with fewer cases are forging ahead with plans to try to limit both deaths and economic damage.
On Wednesday, Walz - who is self-quarantining after possible exposure - told Minnesotans that models project an eventual 2.4 million infections statewide.
If allowed to spread unchecked now, he said, as many as 74,000 Minnesotans could die because too few hospital beds and ventilators means patients won’t get the medical care they need.
Economically, he said, the state can't afford to stay shut for a year or more until a vaccine is developed, an approach an influential Imperial College study here recommends.
So Walz is imposing a strict “stay-at-home” order for two weeks and a more relaxed version for a few weeks after that, to give hospitals the time to prepare. Epidemiologists refer to this as “flattening the curve.”
“I don’t believe it’s prudent to try to shelter in place until a vaccine is there,” Walz said. “I’m asking you to buckle it up for a few more weeks here.”
Even that will be painful: state officials estimate 28% of Minnesotans will be temporarily jobless for the next two weeks, with about 40% of those without any form of paid leave.
Once businesses and schools reopen, Walz hopes to use testing and targeted quarantines to keep new cases in check.
But he acknowledged there will be more deaths. “It’s agonising and I find it nearly unacceptable,” he said. “My job is to reduce it down.”
Coronavirus is about 10 times deadlier than the flu, killing one of every hundred that get it, according to Anthony Fauci, the top US infectious disease expert. Given Walz’s estimate of 2.4 million Minnesota residents infected, that means 24,000 dead.
So far there have been 503 cases and nine deaths in the state.
False tradeoff
For a growing chorus of economists, the notion of weighing deaths against the economy is fundamentally flawed.
“One can do those types of quite gruesome calculations,” said MIT economist Emil Verner. But evidence suggests “that in some sense, that’s a false tradeoff,” he said.
Verner last week co-authored a paper about the response to the 1918 flu epidemic and found that cities that restricted public gatherings sooner and longer had fewer deaths - and ultimately emerged from the pandemic with stronger economic growth.
“Saving lives and saving the economy are not in conflict right now,” former Fed Chair Janet Yellen and more than 30 other current and former policymakers and economists wrote in a joint statement published earlier this week.
Paul Winfree, director of economic policy studies at the conservative Heritage Foundation, agrees that easing restrictions too early could be damaging. But, he said, allowing the downturn to deepen into a depression would ultimately negatively impact health.
“The White House is starting to weigh the long and short term health consequences of coronavirus and mitigation...(and) they are hearing from the business community that there needs to be some level of certainty,” he said.
The question remains if the American consumer, who is responsible for about two-thirds of US GDP, will be confident enough to go to crowded malls and cozy restaurants if the death toll is still rising.
UCLA professor Andy Atkeson says that though lifting lockdowns may seem like an economic shot in the arm, doing so could let infections shoot right back up again.
“Americans would lock themselves down, afraid to go out to shop and work given the illness and death around them,” Atkeson wrote.
- Reuters
