Worst Case

This morning, the Editors of the Wall Street Journal have voiced what some of us have been saying since the COVID-19 hysteria began:

This won’t be popular to read in some quarters, but federal and state officials need to start adjusting their anti-virus strategy now to avoid an economic recession that will dwarf the harm from 2008-2009.

The vast social-distancing project of the last 10 days or so has been necessary and has done much good. Warnings about large gatherings of more than 10 people and limiting access to nursing homes will save lives. The public has received a crucial education in hygiene and disease prevention, and even young people may get the message. With any luck, this behavior change will reduce the coronavirus spread enough that our hospitals won’t be overwhelmed with patients. Anthony Fauci, Scott Gottlieb and other disease experts are buying crucial time for government and private industry to marshal resources against the virus.

Yet the costs of this national shutdown are growing by the hour, and we don’t mean federal spending. We mean a tsunami of economic destruction that will cause tens of millions to lose their jobs as commerce and production simply cease. Many large companies can withstand a few weeks without revenue but that isn’t true of millions of small and mid-sized firms.

Even cash-rich businesses operate on a thin margin and can bleed through reserves in a month. First they will lay off employees and then out of necessity they will shut down. Another month like this week and the layoffs will be measured in millions of people.

The deadweight loss in production will be profound and take years to rebuild. In a normal recession the U.S. loses about 5% of national output over the course of a year or so. In this case we may lose that much, or twice as much, in a month.

It's time—RIGHT NOW—for local, state and federal leadership to come to an understanding that the cure they have concocted may become far worse than the disease they are trying to battle. It's reasonable to argue that they have acted with the best of intentions, but that doesn't necessarily mean the the best of outcomes will be the result. If they inadvertently destroy our economy and severely impact the lives of tens of millions of working people—all in an effort to flatten the viral spread—they will have accomplished little.

Those at greatest risk are people over the age of 65 with a compromised health profile. And even among that group, COVID-19 is NOT Ebola. The vast, vast majority of seniors who contract the virus will recover. And the vast, vast majority of seniors are not selfish. They recognize that life has risks, including the occasional worldwide viral pandemic (no ... COVID-19 is hardly "unprecedented"), and turning the country and the economy upside down is not the best strategy for their children, their grandchildren, or the future in general.

This morning, CA shut down all but essential businesses. The current argument for the action is that the medical system will be overwhelmed, but that's a worst case scenario numbers game. It could happen, but there's little hard evidence that it will. If the state remains shut down, CA leadership will have achieved what may very well be an actual real-world worst case, millions out of work, potential social upheaval, and—this is important—the virus will still spread and will still kill.

I can only hope that leaders in other states have the intelligence and political courage to go a different way. But at this point, I'm not optimistic.