Could you have imagined, just a few short months ago when we had one of the best U.S. economies on record, that we would be facing one of the worst today?
It’s difficult to do.
But the disruptions caused by fear of COVID-19 and the shutdowns ordered by state and local governments have dramatically changed our lives — so much so that it’s difficult for many to have hope in a prosperous future. This recession should be called the Great Disruption.
But we can look to that roaring economic situation in February for guidance in finding the path to increasing our freedoms and flourishing now, no matter the circumstance.
This begins with responsibly ending the shutdowns ASAP.
We should look at the data and understand there is still a need to protect our vulnerable populations — but our kids should get back to school and us healthy adults should get back to work.
We take on risk every day, and even the shutdowns aren’t without risk. The data keep pouring in, demonstrating that in this case, the cure has been worse than the disease.
Researchers from top institutions looked at the data on fatalities related to COVID-19 and those losses of life from unemployment and missed health care due to the shutdowns. What they find is startling: “the disease has been responsible for 800,000 lost years of life so far” while the lockdowns are responsible for a conservative estimate of “at least 700,000 lost years of life every month, or about 1.5 million so far.”
In other words, the costs of the shutdowns on lost life-years is almost double that from COVID-19.
The value of life is hard to measure because each one is beautiful. That’s why it’s disturbing that the deaths from issues related to the shutdowns seem to be far exceeding those directly related to the disease.
Economist Casey Mulligan, who is a Professor at the University of Chicago and was recently the Chief Economist at the White House’s Council of Economic Advisers, has been tracking the daily cumulative costs of the COVID-19 pandemic at pandemiccosts.com.
Mulligan notes that these costs were at least $1.3 trillion in total, or $10,954 per household through May 22. This includes mortality costs and market and nonmarket costs of shutting down the economy.
And this is just through May 22.
Consider the lost economic output on an annualized basis of -5 percent in the first quarter of 2020 and of a projected record -40 percent in the second. Compare this with the growth we could have had if pro-growth policies in President Trump’s budget that I helped craft had been implemented, and that’s roughly $2 trillion in lost prosperity.
If you add the more than $9 trillion Congress has approved in financial assistance packages, then you’re talking about nearly half of the economy being redistributed in some capacity — in a very short period.
This is certainly the greatest disruption ever and the swiftest redistribution ever — both of which will cause massive distortions throughout our livelihoods, including for future generations, and will need to be corrected soon.
And now, states are asking for more federal bailouts (when they’ve already been authorized to get about $1 trillion).
Bailouts will only enable blue states to extend their costly shutdowns and continue their poor fiscal policies, which long predate the pandemic. Yet House Democrats are prepared to grant the states’ requests, as they have passed another $1 trillion in state bailouts in the HEROES Act.
We must not let this happen.
Let’s not let this COVID-19 crisis go to waste, though. Let’s learn from our mistake — shutting down the economy is a cure clearly worse than the disease.
What should the path forward look like? Responsibility, not restrictions. Social distancing, not shutdowns. And governments and civil society must be better prepared for major costly events.
After ending the shutdowns, a way to ensure this is by passing the Workplace Recovery Act.
This Act would direct federal funds to assist any business that experienced losses due to the shutdowns out of their control. It would provide the operating cash businesses need to survive and employ workers. And while I’d prefer not one more dime be authorized, this proposal would work as a targeted automatic stabilizer until normality returns where businesses hire workers to not waste taxpayer money.
And if there’s a double-dip recession caused by shutdowns due to another wave of COVID-19, then Congress doesn’t need to pass more massive spending bills that bankrupt future generations. The WRA isn’t a silver bullet, but it will help give Americans confidence that no other legislation yet has.
We’ve had a natural experiment on how to deal with a pandemic. There were the best of intentions. But as Milton Friedman said, “One of the great mistakes is to judge policies and programs by their intentions rather than their results.”
The results show we have much to learn, but an important one is governments should never shutdown our freedoms again.
Vance Ginn, Ph.D., is Chief Economist at the Texas Public Policy Foundation in Austin, Texas. He is the former Associate Director for Economic Policy of the Office of Management and Budget at the Executive Office of the President.
Vance Ginn, Ph.D.