When Economists Take a Back Seat to Virologists

Abstract

When Economists Take a Back Seat to Virologists Teresa Ghilarducci (bio) the current pandemic has given the world two bad choices: (1) put the economy in deep freeze and suffer the devastation of lower incomes, bankruptcy, and unemployment; or (2) restart the economy without a vaccine or sufficient testing—meaning about 70 percent of Americans will get the disease and we'll send about 10 percent to the hospital (Garg et al. 2020). So far, the economists are taking a back seat to the virologists and supporting the choice of the economy being in the deep freeze for two reasons (Gottlieb et al. 2020). First, powerful corporations and individuals are doing well in the pandemic as they maneuver into monopoly positions, and governments have shored up liquidity and boosted demand. Alphabet (Google) and Amazon will likely emerge as winners post-COVID-19 (Swartz 2020). Second, unemployment and the lack of business are not what they were in the pandemic of 1918, or the Great Depression, or the 2008 global financial crisis (or "GFC," as they call it on Wall Street). Congress and the Federal Reserve are replacing incomes and providing liquidity as fast as they can with four phases of relief, including "stimulus checks" of $1,200 to individuals; and cash infusions for small businesses, hospitals, airlines, and states and cities. After all, it is not unemployment that matters most to people but the lost income when they don't work. (Though there were some interesting distinctions, all OECD countries rapidly enacted basically the same fiscal and monetary stimulus policies [Reuters 2020].) [End Page 247] What is strange about this recession is the absence of austerity economics. In the last recession there was a strong tug from austerity economists. Harvard University's Kenneth Rogoff and Carmen Rein-hart got all the attention in the midst of the 2008 global financial crisis; the number 90 percent was invoked as the knife-edge debt to GDP ratio over which societies would slow (Cassidy 2013). A University of Massachusetts graduate student, Tom Herndon, and professors Michael Ash and Robert Pollin found a mistake in Rogoff and Reinhart's work, reversing their conclusion, but the repudiation was made too late to stop the Obama administration from trimming the Recovery Act of 2009 for fear of too much debt. As a result, the stimulus was much smaller than many economists think it should have been (Herndon, Ash, and Pollin 2013; Krugman 2010). Given this history, I find it quite amazing that there is almost unanimity across economists that the debt should grow and the economy should be stimulated, and that meanwhile we should remain shut down and wait for testing and a vaccine, despite the reality of a deep recession (Initiative on Global Markets 2020). The differences between economists emerge as soon as some call a return to normal good enough and others balk at the increased concentration of power, the increased wealth inequality, and the decline in labor power due to long-lasting high rates of unemployment—estimated to reach over 10 percent by the end of 2021 (Swagel 2020). One thing virologists can't do is help interpret how unequal a post-COVID-19 society will look. Because of the underlying inequities in the incidence of obesity, diabetes, and child immunizations, unemployment and poverty have unequal health consequences. A recently published book by economists Anne Case and Angus Deaton on economic decline and premature death predicted what we see today (Karma 2020). Where economists have fallen down in this plague is that we have not been vocal enough about how the pandemic is differentially affecting societies and groups. Economists need to step up and stand [End Page 248] next to the virologists by bringing forward the economic advantages of safe workplaces, more paid sick leave, a functioning Occupational Safety and Health Administration, fair taxes to pay for the debt, and a health system and communities that help the poor in fighting the disease. Teresa Ghilarducci teresa ghilarducci, a labor economist and expert in retirement security, is the Bernard L. and Irene Schwartz Professor of Economics at The New School for Social Research and director of the Schwartz Center for Economic Policy Analysis. Her...