As Economic Toll Mounts, Nation Ponders the Trade-Offs - WSJ

3/23/2020 As Economic Toll Mounts, Nation Ponders The Trade-offs - WSJ

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ECONOMY As Economic Toll Mounts, Nation Ponders The Trade-oﬀs The cost of confronting the pandemic is millions of jobs and trillions in wealth lost to save potentially millions of lives

Vice President Mike Pence, coordinating the coronavirus task force, has been working the phones and probing leading epidemiologists and physicians about how to craft a long-term national strategy. PHOTO: YURI GRIPASREUTERS

By Jon Hilsenrath and Stephanie Armour March 23, 2020 929 am ET

The nation’s costly ﬁght against the coronavirus pandemic is stirring debate inside the Trump administration and beyond about how much economic loss the country can bear to save an unknowable number of lives infected by the disease.

Millions of jobs were lost within days and millions more are projected to vanish as whole industries grind to a halt, streets empty and people hunker down at home to limit the spread of disease. Trillions of dollars are projected to be lost in economic output; trillions have been wiped out in stock market value; and trillions in government debt will be accumulated in the months ahead to help support households and businesses struggling to pay bills.

https://www.wsj.com/articles/as-economic-toll-mounts-nation-ponders-the-trade-offs-11584970165?emailToken=1acad296b894804d8130860ecd34fea… 1/5 3/23/2020 As Economic Toll Mounts, Nation Ponders The Trade-offs - WSJ “WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF,” President Trump said in a tweet Monday morning. He went on to suggest he might dial back a federal push for the nation to practice social distancing for 15 days. “AT THE END OF THE 15 DAY PERIOD, WE WILL MAKE A DECISION AS TO WHICH WAY WE WANT TO GO!”

Former Goldman Sachs chief executive Lloyd Blankfein made similar comments on Twitter. “Extreme measures to ﬂatten the virus ‘curve’ is sensible-for a time-to stretch out the strain on health infrastructure. But crushing the economy, jobs and morale is also a health issue-and beyond,” he said.

The stakes have rarely been higher for the nation: The risk of death to millions, and the cost of millions of jobs and potential bankruptcies if businesses and households can’t earn cash ﬂow to pay their bills.

Private-sector economists project the toll of the crisis will include 5 million lost jobs and $1.5 trillion in lost economic output. U.S. stocks have already lost $12 trillion in value since mid- February, and globally losses have shredded $26 trillion from investor portfolios. Meanwhile an economic support package is being forged in Congress which economists estimate will double the federal budget deﬁcit to near $2 trillion this year and possibly next too.

At the same time, a widely cited study by Imperial College London warns the U.S. faces 2.2 million deaths from the virus if it does nothing to stop its spread.

Lawrence Summers, a Harvard economics professor and former U.S. Treasury Secretary, said much of this economic toll would be hitting the U.S. even without government-mandated restrictions. Fears of contagion would likely be driving people on their own to avoid restaurants, airplanes and ballparks, even without government mandates, such as mandates in New York and California that people stay home.

“A large part of the dislocation is caused by the coronavirus and not by the policy response caused by the coronavirus,” Mr. Summers said. “I don’t think we need to turn this into a dollars- versus-lives thing at this stage.” He said the best choice was likely addressing the health risk, treating the economic damage, and then working to prevent future pandemics.

Vice President Mike Pence, who is coordinating the coronavirus task force, has been working the phones and probing leading epidemiologists and physicians about how to craft a long-term national strategy, according to two people familiar with the discussions. His questions have echoed that of a growing number of Americans: When—and how—will this end?

Some are panning, and even defying, lockdowns as draconian. Florida Gov. Ron DeSantis refused to close beaches for spring break. The U.S. Chamber of Commerce urged Mr. Trump to declare a wide range of business as essential to get the nation through the pandemic, including banks, hardware stores, plumbers, dry cleaners, taxis and laundromats, among others. https://www.wsj.com/articles/as-economic-toll-mounts-nation-ponders-the-trade-offs-11584970165?emailToken=1acad296b894804d8130860ecd34fea… 2/5 3/23/2020 As Economic Toll Mounts, Nation Ponders The Trade-offs - WSJ Even among scientists who study pandemics, some are starting to wonder about the cost of ﬁghting the disease. Michael Osterholm, a University of Minnesota disease specialist, stunned some in the science community when he suggested letting people at low risk of serious disease continue working to keep the economy going.

“This is not like a Minneapolis blizzard that blows through,” he told The Wall Street Journal. “It’s like a Minneapolis winter that lasts for months.”

The White House based much of its decision to urge social distancing—limiting people to small gatherings, shutting businesses and schools and ensuring people keep 6 feet apart—on the Imperial College London report this month that estimated 2.2 million deaths would occur without it, in addition to isolation of infected people and quarantines of their family members.

Neil Ferguson, the epidemiologist who worked on the report, now is infected with coronavirus.

Countries facing the same dilemma are responding in diﬀerent ways. Italy gradually locked down parts of the country and now has closed all but essential services and ordered people to stay home except for work or health necessities. The U.K. government had avoided the strict measures taken elsewhere until Friday, when it ordered all bars, pubs, restaurants, cafes, gyms and theaters to close. India on Sunday tested a nationwide one-day voluntary shutdown, in which people were asked to stay in their homes and most businesses were shut.

In the U.S., health experts have urged continued shutdowns until the country builds the ability for massive testing to identify and quarantine infected individuals. But the country is so far behind in its testing ability, with shortages of critical chemicals and supplies looming, that it remains unclear whether it could take months or even a year to implement the testing strategies that enabled Singapore and South Korea to contain cases while keeping major swaths of their economies running.

Economists say the brewing debate about the economic cost of ﬁghting the coronavirus is a little like the global debate about climate change. In both cases scientists predict widespread human loss without action, but the action requires economic sacriﬁce.

The critical diﬀerence between the climate debate and coronavirus is that the climate debate has already played out glacially for years. The consequences of the problem and policy responses are predicted to occur gradually in coming decades. With the coronavirus, these trade-oﬀs are being made in just a few weeks, with the human loss and economic toll happening all at once.

“It is the same thing with climate change, but on a totally diﬀerent time scale,” said James Hammitt, a professor of economics and decision-making at Harvard’s T.H. Chan School of https://www.wsj.com/articles/as-economic-toll-mounts-nation-ponders-the-trade-offs-11584970165?emailToken=1acad296b894804d8130860ecd34fea… 3/5 3/23/2020 As Economic Toll Mounts, Nation Ponders The Trade-offs - WSJ Public Health.

One corner of economics has developed tools that researchers say can help get at the scale of what the nation confronts. These “value of statistical life” measures estimate what people are willing to pay to reduce the probability of dying.

Economists derive the numbers from surveys and through inferences from individual work choices, for instance by looking at how much added compensation people demand for doing high-risk jobs like logging, deep-sea ﬁshing or rooﬁng.

Value-of-statistical-life measures are routinely used by the federal government to calculate the costs and beneﬁts of a wide range of health and environmental regulations, which also come with trade-oﬀs between public safety and economic cost.

W. Kip Viscusi, a Vanderbilt University economics and law professor and leader in these valuations, estimates the value of a statistical life at around $10 million. The number means a U.S. community of 100,000 people would on average pay $100 per person to reduce the risk that one person in the community would randomly be killed by some threat. The community is essentially paying $10 million to reduce the risk that one among it will die.

Even under normal circumstances, such measures are complicated by many factors. For example, should the life of a child be given the same value as the life of an octogenarian? How do you account for age diﬀerences for a disease that aﬀects the elderly most? Is a life in Laos worth as much as in the U.S.? Most people would say a life in either country is of equal value, but the calculations are based on how much a person would pay to reduce the risk of death, and because incomes are lower in Laos than in the U.S., the statistical value of life there is lower too.

In this case, the unknowns are especially large, notes Joseph Aldy, a Harvard professor and former adviser to President Barack Obama. The mortality rate of the virus itself is unknown. Because testing has been especially sparse in the U.S., nobody knows how widespread it is in the population, or how aggressively it transfers from one person to another.

“It is hard to even assess probabilities,” he said.

Mr. Viscusi noted another conundrum. Economic dislocation causes its own health problems.

https://www.wsj.com/articles/as-economic-toll-mounts-nation-ponders-the-trade-offs-11584970165?emailToken=1acad296b894804d8130860ecd34fea… 4/5 3/23/2020 As Economic Toll Mounts, Nation Ponders The Trade-offs - WSJ “Mortality rates rise after periods of unemployment and income loss,” he said. “Even if health is your only concern and financial costs are not considered, adopting prevention efforts that limit the adverse effects on income is important.”

The U.S. should be willing to bear substantial costs to overcome this virus, because it is something that can cascade out of control, said Mr. Hammitt at Harvard.

How much cost?

“I don’t know,” he said.

—Gwynn Guilford and Josh Mitchell contributed to this article.

Write to Jon Hilsenrath at [email protected] and Stephanie Armour at [email protected]

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