Famed Economist Predicts 'Great Depression Scenario' if Economy Shutdown Goes 'Much Past' May 1
It’s painful, even as someone who doesn’t run his own business, to pay close attention to the economic numbers.
Spending a morning with the dial on CNBC feels like being an outmatched amateur boxer in the ring with a heavyweight champion — the thump of repeated punches, the desperate grasping for air, gloves searching for ropes to clutch and finding there are none within reach.
Businesses are closed; many won’t reopen. Some economists have forecasted an unemployment rate that tops 25 percent.
Anyone who raises the idea that the economy needs to be opened at some point in the near future is almost always dismissed as a venal money-grubber who’s willing to throw lives on the pyre for Wall Street.
Economist Stephen Moore, however, says that not getting coronavirus under control in a timely manner so that the economy can be reopened could mean entering the darkest economic period in almost a century.
Moore, a Washington Examiner columnist who has advised President Donald Trump on the economy, told WNYM-AM during an interview Sunday that an extended shutdown could be catastrophic.
“If we go much past May 1, we are facing a potential Great Depression scenario,” Moore said, according to the New York Post.
“At some point soon, we’re going to have to make some real decisions about what kind of a calamity we are causing through this lockdown of our economy.
“I’m not saying we should be inattentive to the public health concern,” he added. “But at some point, we have to worry about what we’re doing to our society, and what kind of economy we’re going to have after this is all over.”
During the interview, Moore still expressed optimism that there could be a V-shaped recovery — a huge decline followed by a quick rebound — if the economy was reopened soon, something other economists have been downplaying recently.
And when it comes to reopening the economy, the president says tough decisions need to be made.
“Because you know, at a certain point, you’ll lose more people this way through all of the problems caused, than you will with what we’re doing right now,” Trump said at his Saturday news conference regarding stay-at-home orders.
“What we’re doing right now, I think is going to be very successful, but you know what? I don’t know. We have a big decision to make at a certain point. OK? We have a big decision to make.
“We went this extra period of time, but I said it from the beginning, the cure cannot be worse than the problem itself.”
“We have to open our country again,” he added. “We don’t want to be doing this for months and months and months.”
Dr. Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases and one of the most visible members of the president’s coronavirus task force, has identified three criteria he feels are necessary to roll stay-at-home orders back: testing, and the ability to isolate patients and to conduct contact tracing.
Unfortunately, the plan to reopen the economy may be stymied if only because the financial capital of the United States is now the world epicenter for coronavirus cases and likely won’t be able to reopen in any appreciable way on May 1.
There’s also a new study popular among proponents of keeping the economy shut for longer periods of time that found that communities that took more aggressive steps to combat the 1918 influenza pandemic were more likely to see a quick economic rebound than those that didn’t.
“It’s important not to lift too early,” Emil Verner, a Massachusetts Institute of Technology economist who co-authored the study, told The New York Times.
“Because if we lift too early, the pandemic can take hold again. And that itself is very bad for the economy.”
It’s a curious parallel, however, in an economy so different from 1918 that there really isn’t much comparison to be made. This is terra nova, something no modern, globalized economic system has ever faced.
We thus can’t discount the possibility of a Great Depression scenario ensuing if we don’t open things back up soon, partly because this is uncharted territory.
Reopening America isn’t just a matter of making tough decisions. It’s also a matter of establishing the mass testing and contact tracing we need in order to make this a reality.
We can start reopening in areas where there’s little chance of infection. We can allow people who’ve recovered from COVID-19, and are therefore immune, to go back to their jobs.
If this is executed properly, there doesn’t need to be a second spike in infections.
We’ll begin seeing how it’s done when countries like Italy and Norway begin potentially emerging from lockdown later this month as new cases begin to decline there.
Not that they’ll be an absolute blueprint for the United States, given the relative difference in the population and size of our nations.
After that, though, America needs to get it right. We can’t afford a new Great Depression.
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