Coronavirus: Testing and Safe Production vs. Expensive Stimulus

March 24, 2020

Covid‐19 is pushing the U.S. economy into recession as businesses cut back and close down. Congress is set to pass a huge stimulus and business support package that will cost taxpayers $1 trillion or more.

I fear much of the spending will be misdirected, at least that portion aiming to boost demand rather than sustain safe supply. Policymakers should focus on widespread virus testing and distributing safety equipment to help get businesses back in safe operation as soon as possible.

Economists Paul Romer and Alan Garber discuss that strategy in the New York Times. They argue, “To protect our way of life, we need to shift within a couple of months to a targeted approach that limits the spread of the virus but still lets most people go back to work and resume their daily activities.”

The authors propose two strategies: “The first relies on tests to target social distancing more precisely. The second relies on protective equipment that prevents the transmission of the virus.”

Much of the spending in the proposed stimulus bill is a Band‐Aid. As Romer and Garber said, “Loan guarantees and direct cash transfers will stave off bankruptcy and default on debt, but these measures cannot restore the output that is lost when social distancing keeps people from producing goods and services.”

The authors argue that “Investment in protective equipment and tests would be a far less expensive, better way to stimulate the economy than giveaways and transfers.” It would also keep the government in its proper sphere of public health rather than trying to keep the economy afloat with borrowed money.


Facebook Twitter Google+ Share
Zircon - This is a contributing Drupal Theme
Design by WeebPal.