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The debate over reopening the economy has heated up. Good. We need to reopen soon.
In my latest Bloomberg column, I discuss seven principles to guide that debate: https://www.bloomberg.com/opinion/articles/2020-04-14/coronavirus-impact-on-economy-how-to-fix-it?sref=QK42wmXj @bopinion
The debate over reopening the economy has heated up. Good. We need to reopen soon.
In my latest Bloomberg column, I discuss seven principles to guide that debate: https://www.bloomberg.com/opinion/articles/2020-04-14/coronavirus-impact-on-economy-how-to-fix-it?sref=QK42wmXj @bopinion
2/ First, acknowledge that the shutdown was the right thing to do. It was the right moral decision, the right public health decision. Economically, this strategy surely preserved more productive capacity than has been lost in income at this point by businesses and workers.
3/ But a shutdown this severe must be short.
4/ Then the U.S. needs to decide what its goals are as it tries to get the economy back on track. Should the objective be to stamp out the virus? Or that new cases be steady or declining?
5/ Should the aim be to have as much economic activity as possible, provided that hospitals are able to handle the number of sick patients? Or to have as much normalcy in daily life as possible, provided the share of vacant ICU beds is above some threshold?
6/ Judging by those last metrics, we could begin at least partially reopening some cities very soon.
7/ As we emerge from out self-imposed coma, policymakers need to be comfortable discussing the trade-off between lives and economic outcomes. Different metrics have different implications for this trade-off, and the decision to reopen faster would likely result in more cases.
8/ The fourth principle: The U.S. will need to act without having all the necessary information. Yes, a massive testing regime is ideal. But public sentiment may not be patient enough to wait for one. And waiting for one may be the wrong economic decision, too.
9/ A regional opening strategy can depend on governors. Governors of three Western states and six Northeast states, including New York, have already formed alliances to plan for regional reopenings, though the timeline is unclear.
10/ The sixth principle is to accept the ebbs and flows of progress. There is debate on whether the economic recovery will follow a “V” or a “U” shape. I’m still optimistic about a “V,” but think a “W” is more likely than a “U.”
11/ Finally, Congress should be prepared to continue its attempts to rescue the economy over the longer term. During the last recession it took about two years for the unemployment rate to double from 5% (December 2007) to its peak of 10% (October 2009).
12/ Contrast that with the speed of economic decline in this crisis: The unemployment rate in February 2020 was 3.5%. Two months later, it is likely over 15%.
13/ The fast increase in unemployment could be followed by a relatively rapid decrease. But even if we see significant economic progress next winter — for example, the unemployment rate returning to the single digits — conditions could still be far from healthy.
14/ Other countries are reopening in a gradual way that could build confidence. In Austria, small shops will resume normal activity on this week, larger stores on May 1, restaurants, hotels and schools in the middle of next month, and public events can resume in July.
15/ In Denmark, nursery and primary schools might open this week. Professional baseball teams in South Korea are playing intra-squad games with an eye toward starting the official season in early May. Some shops in the Czech Republic have already been allowed to reopen.
16/ The U.S. should be planning to reopen — and soon.
https://www.bloomberg.com/opinion/articles/2020-04-14/coronavirus-impact-on-economy-how-to-fix-it?sref=QK42wmXj @bopinion
https://www.bloomberg.com/opinion/articles/2020-04-14/coronavirus-impact-on-economy-how-to-fix-it?sref=QK42wmXj @bopinion
