With a recent spike in coronavirus infections, no doubt due to the nationwide riots and demonstrations whipped up by the Democrats since late May, some governors are reversing their earlier easing of economic restrictions. It’s a huge and costly mistake.
At least 10 states and cities are either putting their reopenings on hold or actually imposing new lockdown rules.
Arkansas, Delaware, Idaho, Louisiana, Michigan, Nevada, New Mexico, North Carolina, Oregon and Washington have hit the “pause” button, according to recent press reports. Meanwhile, the U.S.’ three most populous states, California, Florida and Texas, have reversed their reopenings, in essence reimposing a lockdown.
Supposedly it’s a response to 27 states reporting big rises in new coronavirus cases.
But those spikes have two main causes: One, more testing finds more infections. So cases are naturally “spiking”. Two, recent demonstrations, riots and other non-socially distanced activities led to an increase — with nary a peep from the Democratic “progressive” left, which cynically hopes to ride the wave of coronavirus cases into the White House and a congressional majority.
In fact, the data are clear. The lockdowns had no real impact on the virus’ spread. But they did have a devastating impact on the economies where they were introduced.
“Residents and business owners in states under a COVID shutdown mandate from their governors are suffering far more job loss,” according to data crunched by the Kansas Policy Institute. “May private-sector employment in those 43 states was 13.1% lower than a year ago, but the states not shut down by their governors only lost 7.7% of their private job base.”
So, if politicians do their citizens the non-favor of re-closing parts of their economies in the mistaken belief that doing so will halt the spread of coronavirus, they will be making a major error, one that will cost us dearly as a nation.
“Even if lockdowns were the best strategy, the authorities, espousing and imposing them repeatedly, undermined their legitimacy,” wrote former U.S. Treasury official (and Issues & Insights contributor) J.T. Young on The Hill web site. “Authorities have so discredited the lockdowns that there is little chance lockdowns can be reimposed at their prior level — even if they are needed.”
Meanwhile, the long-term cost in dollars of the pandemic lockdowns are enormous, even if we see a rapid snapback in economic activity.
One widely reported forecast by Cambridge University’s business school provided a best-case five-year lockdown cost estimate of $550 billion for the U.S., or about 0.4% of GDP. The worst-case: a $19.9 trillion GDP loss, or a whopping 13.6% of GDP over five years. Even if you split the difference between worst and best cases, you get a loss of about $10 trillion, or roughly 7% of GDP.
This month, meanwhile, the International Monetary Fund forecast an 8% drop in real U.S. GDP in 2020, representing a decline of roughly $1.5 trillion in just a year, by far the biggest dollar drop in U.S. history. By our calculation, that’s roughly a $4,600 loss in income for every man, woman and child in the country.
Only by fully reopening our economy can we avoid this epic policy mistake.
By the way, these forecasts are typical of other recent estimates. If such losses are realized, it would be a tragic blow to our nation’s standard of living for a generation at least.
That lockdowns “work,” as some have suggested, is patently false. The Wall Street Journal in May aptly called the strategy the “Economic Lockdown Catastrophe.” It wasn’t wrong in using that term.
A new study just published by the nation’s preeminent economic think tank, the National Bureau of Economic Research, found that “the largest economic cost of the COVID-19 pandemic could arise from changes in behavior long after the immediate health crisis is resolved.”
That would manifest itself by an increase in “the perceived probability of an extreme, negative shock in the future.”
The study concluded that “the long-run costs for the U.S. economy from this channel is many times higher than the estimates of the short-run losses in output. This suggests that, even if a vaccine cures everyone in a year, the Covid-19 crisis will leave its mark on the U.S. economy for many years to come.”
This isn’t just true for the U.S. The world economy has been shattered by lockdowns.
The global economy faces enormous long-term GDP losses, with estimates ranging from $20 trillion for a two-month, 80% lockdown, to the more-optimistic estimate of $27 trillion over five years. Given the 2019 world GDP was about $88 trillion, that’s a huge hit.
American governors of both parties would be wise to heed these warnings and not backtrack on reopening. There’s very little evidence that those economic openings are the cause of case spikes, as we noted.
Meanwhile, even as reopenings have accelerated, the death toll has declined sharply, an indisputable fact we covered last week.
Economic lockdowns will do nothing to further reduce deaths. But they will increase such social maladies as family dissolution, depression, lost jobs and an increased suicide rate. Governors, you made this mistake once, don’t do it again. Don’t lock you states down.
— Written by the I&I Editorial Board