Economics for a post-lockdown world: Invest now to prevent another Great Depression
President Donald Trump wants to restart the economy by ending the lockdowns and getting people back to work. However, based on U.S. spending, employment and consumption data, the economy started crashing well before lockdowns began in mid-March. Demand for transportation and other services began to collapse in mid-February and early March due to COVID-19’s dangers, and isn’t likely to naturally return to pre-crash levels until the risk of the virus recedes.
In late February through early March, COVID-19 deaths in the United States were about 20 to 30 per day. The daily U.S. death toll is now 1,000 to to 2,000 (and tens of thousands of Americans require hospitalization for severe symptoms). Polling data show that many Americans are reluctant to resume discretionary activities under the current circumstances. For example, 72% of fans in a recent survey said they wouldn’t attend a game at a stadium until a vaccine is available.
So even if all mandatory lockdown measures end, the economy won’t bounce back to January 2020 levels. The Economist described this scenario as a “90% Economy” -technically open, but (due to COVID-19 risks) operating at only about 90% of capacity, with high unemployment rates.
And this is the optimistic scenario.
Assume the worst case, not the best
If daily deaths and hospitalizations increase exponentially after mandatory lockdowns end, the economy will shut down again, either from renewed government-mandated lockdowns or chaotic spontaneous lockdowns as people fear leaving their homes. Economically, this could create an even more devastating downward economic spiral.
Perhaps COVID-19 will rapidly become less dangerous, maybe treatments will become more effective, a vaccine will quickly become available or some other deus ex machina will solve this crisis. However, we don’t prepare for war by assuming a best-case scenario about our enemies. We shouldn’t make policy based on best-case assumptions about COVID-19.
At the federal level, here’s how we should prepare:
►Support state and local governments by replacing tax revenues they’ve lost due to COVID-19. Because they are the first responders, we must ensure they’re well-resourced. As we try to restart the economy, the last thing we need is large-scale layoffs that impact vital employees like teachers and police, fire and sanitation workers. Well-functioning and safe schools are vital to restarting the economy (if parents can’t send their children to school in the fall, it will be difficult for society to resume normal activities).
We should also provide generous support for our public colleges and universities. They’re where many middle-class Americans get their education, and where much of our cutting-edge basic research takes place. We can’t afford to lose a generation of talent if these universities collapse and have to be rebuilt. Also, as large local employers, they bring significant economic benefits to their communities.
►Invest in public health and health care. Trump called Americans warriors in the fight against COVID-19. We send our soldiers into combat with the best protection possible, and a guarantee of the best health care available if they’re wounded. COVID-19 requires the same commitment to America’s workers and consumers.
The best chance to get the economy back on track is to make the workplace and consumer environments as safe as possible. A national Test, Trace, Isolate and Treat program, is an urgent priority. Health care is our frontline and it must be well-funded. In this crisis, we can’t guarantee Americans’ safety against COVID-19, but we must guarantee they’ll have health care coverage to battle its effects.
►Investments and policies that help our economy adapt. Businesses should get tax credits (and other incentives) to make workplaces as safe as possible for workers and consumers. Also, we should facilitate moving unemployed workers to jobs where they’re needed (in one example, Amazon has already added 100,000 workers). Finally, we need tax incentives and other legislation to rebuild inventories of Personal Protective Equipment, and move supply chains back to the United States for products vital to our national security.
►Investing in infrastructure. With low interest rates and slack in the economy, it’s time for the long-delayed push to fix our infrastructure. Money invested in infrastructure will generate current employment and make our nation function better in the long run. This push must also include our digital infrastructure, at the federal, state and local levels. Many government computer systems are antiquated and not fit-for-purpose. They should be replaced before the next crisis.
Reviving economy will be expensive
We should also accelerate providing broadband infrastructure for low-income rural and urban communities. We might be in for a prolonged period of distance learning and/or remote work — and no family should be left behind due to inadequate digital infrastructure.
►Making hard choices about industries that might not come back. Respectable business leaders predict that the airline industry might not come back for years, if ever. My point isn’t to target airlines, but rather to emphasize that we must make some realistic decisions about which industries are no longer viable or need to transform radically to survive.
►Temporary Universal Basic Income and/or generous unemployment benefits. This would put a floor under everyone. If jobs don’t exist, we can’t let people starve. And we need their participation in the economy to keep other people employed.
►Targeted aid to actual small businesses, like local restaurants, and less to big companies. The aid should be focused on helping them transition to more appropriate business models, and distributed in a manner that’s transparent and non-corrupt.
If this looks expensive, well, it is. On the other hand, currently the U.S. government can borrow money for 30 years at just 1.4%. Financially, this is a good time to invest in infrastructure, public health and the education of future generations. If we don’t make these investments now, we’re potentially looking at a multi-year Great Depression.
Steven Strauss is a lecturer and visiting professor at Princeton University’s Woodrow Wilson School of Public and International Affairs and a member of USA TODAY’s Board of Contributors. Follow him on Twitter: @Steven_Strauss or join his mailing list at: http://tinyletter.com/SSStrauss
Originally published at https://www.usatoday.com.