Reopen economy, but do so cautiously
We need to get back to work, but rushing to restart the economy and reigniting the coronavirus pandemic would be the worst possible thing for our economic future.
Undoubtedly, the world is on a precipice.
The U.S. economy likely contracted 7.1 percent year over year in the first three months of 2020. It will plunge 35 percent in the second quarter, according to S&P Global Ratings, a financial analysis and consulting firm.
In its middle-case scenario, S&P Global says the economy will not return to pre-coronavirus levels until late 2022. Worst case, the economy does not recover until 2024.
Fitch Ratings has an equally pessimistic forecast, expecting a 3.9 percent contraction in the global economy for 2020.
“This is twice as large as the decline anticipated in our early April Global Economic Outlook update and would be twice as severe as the 2009 recession,” Brian Coulton, Fitch’s chief economist, wrote. The severe downturn that ended in 2009 was the worst in 70 years and became known as the Great Recession.
Nationwide, 7.5 million small businesses face extinction in the next five months, according to a survey by Main Street America, a 40-year-old nonprofit dedicated to local businesses. More than 35.7 million people could lose jobs.
No wonder people are donning body armor, grabbing rifles and marching on government offices in the modern-day equivalent of protesting with pitchforks and torches. People are panicking.
The people panicking more, though, are those whose doctors are sedating them for intubation because they can no longer breathe on their own. First responders and health care workers are overcoming their panic every day to treat the pandemic’s victims.
We must navigate these waters carefully and thoughtfully.
Some, such as Lt. Gov. Dan Patrick, say President Donald Trump was mistaken in shutting down commerce to slow COVID-19. He believes more than 1 million temporary job losses in Texas were too high a price to save what data reveal were at least 5,000 lives.
Such reasoning, though, is stupid and ill-informed. A
healthy economy requires a healthy society; there is no trade-off.
When asked about their top priority, 61 percent of Americans said they wanted to protect their health, according to a University of Michigan survey. Only 23 percent said their finances were more important.
Since consumers make up 70 percent of U.S. economic activity, we must boost consumer confidence that our health system can address the crisis. Only then will people return to work and begin buying again.
If politicians push a return to normal too quickly, and infection and death rates spike, governments
will have to reissue stay-at-home orders. Consumers will panic and trigger a double-dip recession far worse than what we are experiencing now.
“A second shutdown of the economy, local or national, would be extremely expensive to both firms and consumers; it would also lead to more bankruptcies across both sectors of the economy,” said Richard Curtin, director of the University of Michigan Surveys of Consumers, which produces the consumer confidence index.
A second spike would also take a toll on stocks. Share prices have moved higher in recent weeks after the government, including the Federal Reserve, pumped $11 trillion into the economy, and businesses expressed
hope the worst had passed. A reversal now would be devastating.
“It would appear that the financial markets are oblivious to the obvious and serious financial threat of a potential second wave of the coronavirus,” said Nigel Green, CEO of the deVere Group, a London-based financial advisory firm. “Alarmingly, this does not seem to have been priced in.”
We need a sustained recovery. Betraying the public by opening too much too soon and giving the virus more room to run would destroy confidence and, therefore, the economy.
I understand the urge to throw caution to the wind to stop the financial bleeding. But like the virus itself, the economic damage is going to spread across the nation until there is adequate testing, contact tracing and individual quarantining.
We need a more robust public health system to sustain the battle against the virus, and only that will truly return the economy to normal. In the meantime, each of us must do our part by isolating ourselves as much as possible.
Wear masks and gloves. Follow the advice of public health experts. That is how you can restart the economy, not by getting sick and straining the health care system.
Government officials should reopen the economy only as much as social distancing allows. We must protect the vulnerable, minimize contact with strangers and reconfigure public spaces.
The best we can do is save as many of our neighbors as possible while rebuilding the economy. Reopening too quickly and creating another economic panic would be worse than the disease.