Americans have now suffered through four months of the COVID-19 pandemic. Maine has been spared the worst, ranking among states with the fewest cases and deaths. Maine’s economy has also fared less badly than the nation as a whole – small comfort to the 125,000 Maine workers who’ve lost jobs, and hundreds of Maine businesses suffering or going out of business, especially in hospitality and retail. Although public health policy has largely been effective at preventing the massive outbreaks seen in many other states, the vast economic stress caused by the crisis has led many to wonder if the cure has been worse than the sickness itself – to paraphrase the words of President Trump.
But is there a trade-off between public health and economic health? Are policies such as stay-at-home orders and restrictions on businesses that engage the public preventing a return to economic prosperity? We come down squarely on the side of economists and public health experts who largely agree that this is a false dichotomy. Because the most important prerequisite for any meaningful and sustainable economic recovery is containing the spread of the virus to provide consumers and businesses alike the confidence they need to resume economic activity, smart public health policies will actually improve economic outcomes in the long run.
The latest, high-quality research on economic dynamics unleashed by the pandemic reinforces this picture. A National Bureau of Economic Research study suggests that much of the reduction in consumer traffic to in-person businesses occurred before restrictions were put in place, and consumer fear – rather than government-imposed restrictions – explains nearly 90 percent of this change in consumer behavior. Therefore, even if state and local governments hadn’t imposed restrictions, the economy would likely still be in similarly poor shape.
Across the U.S., it took just several weeks (between mid March and mid April) for a large majority of the public to fear they were likely to get the coronavirus. In turn, consumer confidence dropped dramatically from February to March, largely predating stay-at-home measures, and further declines since. Further, recent polls show a profound hesitation to eat in a restaurant, go to a bar, gym, hotel or church or take an airplane trip (the share of the public willing to do each of these activities ranges from 21 to 46 percent). Until this fear and uncertainty recede, a sustained recovery of consumer confidence and spending is unlikely.
As the pandemic continues, calls for a radical reopening in Maine as a solution to economic pain aren’t supported by economic evidence. For example, Sweden’s experience shows that a lack of public health restrictions does little to limit the economic damage of the pandemic; it only leads to more death and illness. The worst that can happen in Maine is the scenario we see in places that have reopened too quickly – Arizona, Florida, Texas and Georgia especially. There, a refusal to implement proper public health policies allowed for slightly more economic activity temporarily, but is likely to lead to slower growth in consumption relative to other states as the raging pandemic further dampens the spirits of a public already deeply wary of the virus. This represents the worst-case scenario: reopening too aggressively, leading to outbreaks that require reimposition of public health measures, and further restricting consumer confidence.
Maine should continue to exercise caution and prevent the spread of the virus. We cannot return to economic normalcy simply by pretending that COVID-19 is not a serious threat. Although we should do what we can to support businesses and our community in ways that are deemed safe by public health officials, failing to follow scientific recommendations, as many states have, will help no one in the long run – it will only maximize both the medical and economic devastation of the pandemic. Rather, we should press our elected officials for policy solutions that could bridge us to the time the pandemic is defeated: an extension of the Paycheck Protection Program (combined with better management of it); continuing emergency unemployment payments; federal aid to state and local governments to prevent a large and inevitable loss of public-sector jobs, and, hopefully, a thoughtful recovery program that can help entrepreneurs and workers stand up after the health crisis is resolved.
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