Q&A of the Day – Why Shutting down the economy now is best for the economy
Each day I’ll feature a listener question that’s been submitted by one of these methods.
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Today’s entry: I'm pretty tired of the argument you frequently present towards people who are not happy with the current economic situation over COVID-19. Even today you remarked that 1% isn't just 1% to the people who have lost a family member, seemingly justifying almost any economic damage to keep the at-risk population safe.
Well, I happen to know someone who passed away from the flu. Yup, the plain old boring flu, and like many COVID patients, there was an underlying condition that was largely to blame. I don't recall you or anyone else who thinks the current destruction of people's livelihoods is justified, crying over the 30-50k people who die each year from influenza.
If you were honest, you would have a tape of prior shows you could play where you demanded temporary shutdowns in order to save those who would die from influenza or any one of a number of other diseases that kill hundreds of thousands of Americans each year.
Bottom Line: I’ll dive in and explain why shutting down the economy now to stop the spread of the virus is without question best for the economy going forward. You don't have to like the facts regarding this pandemic, I don't either, but ignoring them isn’t helpful. Let’s start here...
I've repeatedly illustrated the difference between COVID-19 and the traditional flu– though not in over a week – so I’ll first take the opportunity to do so with the updated information available. COVID-19 has proven to be 2.5 times more contagious than the traditional flu. So even if it weren’t more lethal than the traditional flu virus, it’d still be 2.5 times more deadly. But it is exponentially more lethal than the traditional flu as well. The traditional flu kills 0.0005% of those who contract it. If every American contracted the traditional flu it'd kill approximately 164,000 Americans. To date the death rate for closed cases of COVID-19 is 21%. A death rate that would project to 69 million American deaths if every American contracted the virus. Likely, the rate will come down significantly with time, as it takes longer for people to recover from the virus than it does for COVID-19 to kill those most susceptible. Still, there's not a measured death rate anywhere in the world that's below 4%. That would still make this virus 8,000 times more deadly than the traditional flu. Heck, even if it dropped to 1%, you’d have a virus that’s 2,000 times more deadly than the flu. But I’d mentioned this story is about economics. Here’s where that comes into play.
Had we done nothing and left the economy open as usual, the best-case outcome, according to the CDC and National Institute's for Health, would have been 1.5 million Americans dying. Exponentially worse than what the flu could do to this country even if every American contracted it. Now here’s where the this comes around to economics. 1.5 million people is greater than the population of eleven states. It’s nearly the combined population of Wyoming, Vermont and Alaska. What would happen to the US economy over the long run if we lost more people than the population of more than a fifth of the states? The permanent loss of at least $81 billion annually, in today’s dollars, for the US economy. Another way of looking at it... Imagine the State of Florida permanently losing Palm Beach County’s population and Broward’s economy. Would that be worth it to keep everything open? There’s not a sound economic argument for having kept the status quo in place because the toll of the virus long-term would have been far more detrimental than the short-term harm to the economy.
There are two sides to stories and one side to facts. I will never stop seeking them and delivering, nor will I ever apologize for what they happen to be. I don't enjoy it anymore than you do, but it's times like these where empirical information is most important.