America Has Opted for a Bad Recession
The coronavirus dilemma isn’t about
lives versus the economy.
lives versus the economy.
By Narayana Kocherlakota
May 22, 2020, 11:00 AM GMT+1
People keep saying that the coronavirus crisis has presented
America with a difficult choice: the lives of our parents and grandparents
versus the economic well-being of our children. I beg to differ. The real choice is, and has always
been, between a sane national strategy
for containing the pandemic and economic disaster.
America with a difficult choice: the lives of our parents and grandparents
versus the economic well-being of our children. I beg to differ. The real choice is, and has always
been, between a sane national strategy
for containing the pandemic and economic disaster.
I don’t like getting sick. If you have a bad cold, I’d
rather not shake your hand. Similarly, I’ll do a lot to avoid getting Covid-19,
even if I’m pretty sure it won’t kill me. As a 45-to-64-year-old, my odds of being hospitalized if infected look
to be about 1 in 25. 1 No thanks!
I’ll pass on getting on a plane or going to a crowded restaurant.
rather not shake your hand. Similarly, I’ll do a lot to avoid getting Covid-19,
even if I’m pretty sure it won’t kill me. As a 45-to-64-year-old, my odds of being hospitalized if infected look
to be about 1 in 25. 1 No thanks!
I’ll pass on getting on a plane or going to a crowded restaurant.
I’m not the only one. Millions of Americans are engaging in self-imposed austerity to stay on the
safe side. As Federal Reserve Chairman Jerome Powell put it on Sunday, “for
the economy to fully recover, people will have to be fully confident.” This
is the challenge policy makers face: how to give people the level of security
needed to support a real recovery.
safe side. As Federal Reserve Chairman Jerome Powell put it on Sunday, “for
the economy to fully recover, people will have to be fully confident.” This
is the challenge policy makers face: how to give people the level of security
needed to support a real recovery.
One option, which Powell emphasized, is to develop a vaccine for SARS-Cov-2, the virus
that causes Covid-19. But this takes time. No vaccine for any disease has
ever been rolled out in less than four
years. It might never happen: SARS-Cov-2 is one of seven known human coronaviruses, none of
which has a vaccine.
that causes Covid-19. But this takes time. No vaccine for any disease has
ever been rolled out in less than four
years. It might never happen: SARS-Cov-2 is one of seven known human coronaviruses, none of
which has a vaccine.
The other option is herd
immunity, in which so many people get the virus and develop antibodies that
there aren’t many people left to infect. But, for you fans of Sweden out there,
it’s not clear that infection confers immunity. Four of the known human
coronaviruses can reinfect people relatively quickly. Scientists don’t know
about the rest.
immunity, in which so many people get the virus and develop antibodies that
there aren’t many people left to infect. But, for you fans of Sweden out there,
it’s not clear that infection confers immunity. Four of the known human
coronaviruses can reinfect people relatively quickly. Scientists don’t know
about the rest.
This leaves policy makers with two paths. The first, and best, is to devise an effective and
comprehensive national testing, tracing
and quarantining program, which would enable us all to feel a lot more
confident that we’re not going to run into people with Covid-19. So far,
though, the U.S. remains wedded to its local vision of public health
governance, in which states largely do their own thing. The result will be a
patchwork approach to contact tracing. Connections that cross state or even
county lines will likely be missed, allowing recurring outbreaks to undermine
consumers’ confidence.
comprehensive national testing, tracing
and quarantining program, which would enable us all to feel a lot more
confident that we’re not going to run into people with Covid-19. So far,
though, the U.S. remains wedded to its local vision of public health
governance, in which states largely do their own thing. The result will be a
patchwork approach to contact tracing. Connections that cross state or even
county lines will likely be missed, allowing recurring outbreaks to undermine
consumers’ confidence.
The second path: Let
the economy evolve organically to provide the assurance that people demand.
This would entail a vast transformation, as both workers and consumers demand
considerably more space to ensure their safety. The process would probably be very
slow, involving persistent unemployment and sluggish growth. Consider, for
example, how long the U.S. economy struggled to adjust to high-priced oil in
the 1970s.
the economy evolve organically to provide the assurance that people demand.
This would entail a vast transformation, as both workers and consumers demand
considerably more space to ensure their safety. The process would probably be very
slow, involving persistent unemployment and sluggish growth. Consider, for
example, how long the U.S. economy struggled to adjust to high-priced oil in
the 1970s.
On the merits, the decision would seem a no-brainer: a
vigorous national public health response versus a horrific recession. I hope
for the former. Sadly, given the evidence so far, I expect the latter.
vigorous national public health response versus a horrific recession. I hope
for the former. Sadly, given the evidence so far, I expect the latter.
See: https://www1.nyc.gov/site/doh/covid/covid-19-data.page,
which shows that 836.12 out of 100000 people in New York City aged 45-64 were
hospitalized. The state reported that about a fifth of all New Yorkers have had
the disease:
https://www.governor.ny.gov/news/amid-ongoing-covid-19-pandemic-governor-cuomo-announces-results-states-antibody-testing-survey.
Hence, over 4% of those aged 45-64 who got the disease were hospitalized.
which shows that 836.12 out of 100000 people in New York City aged 45-64 were
hospitalized. The state reported that about a fifth of all New Yorkers have had
the disease:
https://www.governor.ny.gov/news/amid-ongoing-covid-19-pandemic-governor-cuomo-announces-results-states-antibody-testing-survey.
Hence, over 4% of those aged 45-64 who got the disease were hospitalized.
This column does not necessarily reflect the opinion of the
editorial board or Bloomberg LP and its owners.
editorial board or Bloomberg LP and its owners.
To contact the author of this story:
Narayana Kocherlakota at nkocherlako1@bloomberg.net
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