Studies differ on how fast to reopen U.S. economy
Allegheny County may be reopening its economy at the ideal time.
Its infection rate, on average over the past week, almost exactly equals South Korea’s infection rate of 1.77 daily cases per 100,000 people when that country began successfully reopening its economy, with no infection resurgence, according to the Center for American Progress.
Still, debate continues over keeping the brakes on economic activity versus pumping them and reopening businesses and society.
The center points to South Korea’s success in shutting down the economy and quarantining those infected or exposed to infection and thereby preventing deaths and limiting economic damage.
But the center also is raising concerns that reopening the U.S. economy too early could send infection rates climbing once again, with the national COVID-19 death toll approaching 90,000 and the University of Washington’s Institute for Health Metrics and Evaluation projecting upward of 150,000 total deaths nationwide.
“Being cautious right now is the better strategy because if we reopen too early, we could find ourselves in a situation, given the nature of exponential spread, leading to a second wave of infections that could be even worse than the first,” said Topher Spiro, Center for American Progress vice president of health policy.
“I would hate to see all the progress that we made in these couple of months vanish,” he added. “And I think it’s a false choice between health and the economy. If we end up going back to square one [due to resurgent infections], it will be a much more severe impact on that state’s economy than being more cautious would have been.”
On the other hand, a report by economists at the University of Chicago Booth School of Business recommends reopening the economy sooner rather than later for most age groups while isolating at-risk groups including senior citizens.
It says life always is full of attendant risks, be it driving a car, walking down flights of steps or being exposed to viral disease.
Robert H. Topel, a Booth School economist who holds an endowed chair, said gradual reopening of the economy is appropriate for many parts of the United States, acknowledging there were strong arguments favoring the initial stay-at-home orders and business closures.
But now’s the time to open things up. “In many ways, having looked at all the models and predictions, we’re in the land of the dark a little bit, and loosening up the economy with positive infections rising a little bit, we can deal with that,” he said.
He does warn, however, that “if it takes off again,” action including shutting down businesses such as restaurants may be necessary.
“For now, you have this car with your foot on the brake, and if you press the brake all the way down, you never get anywhere,” he said. “But if you pump the brakes, that’s the better way to proceed.
“We’re just economists and recognize it is a question of balance,” said Mr. Topel, who holds a doctorate in economics. “Choices have to be made, and in all of our lives, we all take risks every day. If you go to a grocery store, you can be hit by a bus, but it’s worth going to the grocery store.”
And if the goal is remaining completely risk-free of infection, “you will have even less of what people want.” Protests already are underway nationwide and in Pennsylvania with people refusing to follow restrictions.
“This is not political,” he said. “Choices have to be made, and the extremes are unlikely to be the optimal policies.”
Arguments, agreements
Countering parts of that argument, the Center for American Progress — generally described as a left-leaning think tank — also said politics weren’t a consideration in its analysis.
Based on mathematics, however, it found that a state must meet key thresholds before relaxing stay-at-home orders. The first is a low incidence of new cases — a rate comparable to South Korea’s or an even lower daily rate of less than 1 per 100,000, as proposed by the Centers for Disease Control and Prevention.
A low incidence rate is necessary because contact tracing, a labor-intensive task of tracking everyone who came in contact with an infected person, becomes inefficient and ineffective when infection rates run too high.
Testing capacity also must be “adequate to detect outbreaks and identify and isolate positive cases as well as their contacts,” the report says.
Analyses, in both reports, involved countries each deemed to have successfully controlled infection rates while limiting economic damage.
Booth School economists looked to Iceland in weighing the risks of death against the risks of economic collapse and found that its ability to shut down the economy and isolate the population, then gradually relax restrictions, has been successful, with 10 deaths among the population of 366,000 and no current cases.
But American Progress said island nations not only are small but also have isolated populations, making them poor models for larger countries.
For that reason, South Korea emerged as its model with a population of 51.3 million and only 11,000 confirmed cases of COVID-19 and 252 deaths. It gradually reopened its economy when the daily infection rate fell below 2 per 100,000 people.
The center set that baseline for reopening the economy, which is equivalent to 5,800 new cases per day in the United States. But it said most states began relaxing their stay-at -home orders, despite rates well above that baseline.
For now, Pennsylvania is relying on the Carnegie Mellon Risk-Based Decision Support Tool, along with economic data from the University of Pittsburgh and the University of Pennsylvania Wharton School of Business.
It also is using the aforementioned University of Washington model, said Nate Wardle, state Department of Health spokesman.
In Pennsylvania, he said, a county can’t exceed 50 new cases per 100,000 people over a 14-day period to get out of the red phase. The state doesn’t break it down into a daily average. But if it did, it would be five times higher than the CDC rate and twice the baseline South Korean infection rate recommended by the Center for American Progress.
But it appears that Allegheny County, with 151 new infections in the past week, had a daily average of 1.77 cases per 100,000 population — exactly the infection rate South Korea had when it began lifting its restrictions.
Mr. Spiro said America’s “original sin” was delaying stay-at-home orders nationwide while lacking sufficient testing resources.
The center’s report concludes that “no state is ready to substantially relax its stay-athome order” while getting enough tests and staffing “to conduct robust contact tracing” once stay-at-home restrictions are eased.
There’s plenty of overlap between the Center for American Progress and Booth School analyses, with both agreeing that an economic shutdown was necessary and could be again, if cases grow.
Most of their differences involve timing. The Chicago Booth School report — “Some basic economics of COVID-19 policy” — looks at “the trade-offs we face in regulating behavior during the pandemic.”
Pandemic costs come in the form of direct impacts on health and lives lost, it says. The second is indirect impacts on individuals, private institutions and governments in mitigating those health impacts that include stay-at-home orders and closing businesses.
Allowing the pandemic to follow its natural course would have cost the nation $6 trillion — a statistical cost assessment of 1.4 million deaths — or about 30% of the nation’s gross domestic product. That suggests that “even small progress against the spread of the disease can be quite valuable,” according to the report.
Shutting down nonessential economic activity, however, comes at a cost of $7 trillion per year — $20 billion per day.
Each represents an all-or-nothing strategy. An intermediate strategy of reducing both deaths and economic damages is the goal, the Booth School concluded. The school has a history of advocating freemarket policies.
“It is critical to remember that the tradeoff here is not between ‘lives’ and GDP — it is the trade-off between two things that people themselves value: health and other aspects of their lives.”
Social distancing and staying at home will continue regardless of government actions, both plans agree.
Rather than imposing tight restrictions, it would be wiser, when circumstances permit, to test, trace cases and quarantine those with the virus or potentially exposed to it, the Booth School said.
Now, a longer-term plan, it said, should keep high-risk groups in isolation with tools available to monitor outbreaks and react quickly if they occur. Still, businesses should be allowed to reopen with low-risk groups allowed to seek some semblance of normalcy.
At the outset, when there is great uncertainty, the best policy is suppressing the economy for a while to reduce infection rate to a very low level “then whack-a-mole whenever it pops up somewhere and send resources in a targeted way to keep it suppressed,” Mr. Topel said.