The shutdown is killing the economy
President Trump has announced that he is aiming toward Easter Sunday to start getting the economy up and running again. This has triggered heavy opposition. There is a serious debate about how much destruction to the economy we are willing to tolerate to save lives from the coronavirus. How many millions of businesses are we willing to allow to file for bankruptcy? How many millions of workers are we willing to become unemployed? This calculation is difficult to make because we do not know how many people the coronavirus will kill. It seems cold hearted, even cruel, to assess the costs versus the risks of policy actions when lives are at stake.
But guess what? Government officials have to make these decisions all the time. Most regulations are approved based on economic costs versus lives saved. If the only goal of government is to minimize deaths, then the first step would be to prohibit people from driving cars and abolish swimming pools, amusement parks, and bacon. We do not do these things because we have decided as a society that benefits for 320 million Americans of having reliable transportation outweigh deaths on the highway.
This is also why President Trump, along with governors and mayors across the country, need to acknowledge that the lockdown of the economy also carries health risks and unintended consequences. You cannot crush the economy without having a significant degree of human misery and even deaths, not counting the loss in dollars of wealth and income.
In an academic article two years ago, Taiwanese researchers showed a direct link between unemployment and suicide, a link that can linger for up to three years after unemployment has already retreated. Even a brief recession has lasting consequences. In rough terms, each 1 percent rise in unemployment leads to one additional suicide for each 100,000 people. If unemployment increases by 5 percent in the current economic shutdown, that could mean some 16,500 additional suicides. A 10 percent spike in unemployment could mean some 30,000 additional suicides.
A study by the National Survey of Drug Use and Health found the rate of drug addiction could be as much double for those who are unemployed as for those who are employed full time. Research by the Federal Reserve Bank of Saint Louis concluded that with large increases in unemployment, the number of drug users can also rise dramatically. Yet another study by the National Bureau of Economic Research found a 1 percent increase in the unemployment rate could mean a 3 percent rise in opioid overdose deaths and more than a 6 percent rise in emergency room visits.
Among Americans between the ages of 50 and 75, a study in the Archives of Internal Medicine found the unemployed are 35 percent more likely to suffer a heart attack. Robert Zoellick, the former World Bank president and the former United States trade representative, and others have noted that supply chain disruptions jeopardize the health and lives of patients facing health risks other than the coronavirus. In other words, the human toll will be very real from job losses, business bankruptcy, and so on.
There are some 20 million Americans with cancer or survived it, another 30 million with heart disease, 34 million with diabetes, and 35 million with chronic lung disease. All together, nearly one in five Americans are being treated for these ailments. What happens if they cannot get medications and treatments thanks to the economic lockdown? If just one in 1,000 of these people dies because they cannot get their medications, or because hospitals cannot take them in, that is another 75,000 deaths.
An economic shutdown is a supply chain shutdown like never before. The two of us both know people who have died from the coronavirus and the heartbreak associated with it. Americans are right to be worried. Donald Trump has likened himself to a “wartime president” fighting this invisible enemy. Being smart and reasonable about the costs and benefits of every strategy decision is critical to winning wars against all enemies.
Robert Arnott is the chairman of Research Affiliates, a global investment firm based in Newport Beach, and a visiting professor of finance with the University of California Anderson School of Management. Stephen Moore was senior economic adviser to Donald Trump during the 2016 campaign and is one of the three founders of the Committee to Unleash Prosperity.