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My last column for Skeptical Inquirer landed me on a conservative Chicago-area talk radio program. I think something about the title, “COVID-19 and the Tyranny of Now,” caught the eye of one of the show’s hosts, so they invited me on to discuss the article in the morning drive slot. The conversation was polite, and although I tried to find as many points of agreement as possible, it soon became clear we actually had less in common than the host must have imagined.
In preparation for my appearance, I listened to the show for a few hours, and the hosts and callers spent much of their time complaining about the coronavirus health policies, such as the closing of restaurants, bars, and schools, imposed by the Illinois governor and Chicago mayor (both Democrats). On the morning of my interview, they were pointing to the increased number of “deaths of despair” during the stay-at-home period, in particular the rise in drug overdoses in the Chicago area.
These complaints about closings have been common at all levels of the Republican Party. On May 18, 2020, when the seven-day moving average of COVID deaths was at 1,479 (Worldometer.com), the president tweeted “REOPEN OUR COUNTRY!” In early August, as concerns about the reopening of schools were on people’s minds, the president tweeted, “OPEN THE SCHOOLS!!!” Perhaps the strongest executive branch statement came from U.S. Attorney General William Barr who said the public health restrictions represented an intrusion on civil liberties second only to slavery.
“You know, putting a national lockdown, stay-at-home orders, is like house arrest. It’s — you know, other than slavery, which was a different kind of restraint, this is the greatest intrusion on civil liberties in American history.” —U.S. Attorney General William Barr
REOPEN OUR COUNTRY!
— Donald J. Trump (@realDonaldTrump) May 18, 2020
OPEN THE SCHOOLS!!!
— Donald J. Trump (@realDonaldTrump) August 4, 2020
On October 3, 2020, National Public Radio’s Michel Martin interviewed Diana Vaughan and Nick Sherman, two Republican members of the Washington County Commission in Pennsylvania. Both complained about what they saw as the overly harsh coronavirus policies implemented by their Democrat governor:
He violated our constitutional rights, our right to assemble. He violated the rights of businesses under the equal protection clause when he closed their businesses, taking of property without compensation. And he limited the numbers of those who could gather. —Diana Vaughan, Washington County (PA) Board of Commissioners.
According to Vaughan, the Washington County Board of Commissioners, along with three other boards of commissioners, had taken legal action against the governor.
Under normal circumstances, conservatives tend to be in favor of less government regulation, and it is hard to imagine a more forceful kind of regulation than business shutdowns and stay-at-home orders. As a result, these calls to reopen have a familiar sound, but the COVID edition of these pleas for less regulation are based on the assumption that state and local health orders are the obstacles to economic recovery. But is that true?
SARS-CoV-2 spreads from person to person through the air, particularly in enclosed spaces with poor ventilation and many people. These are now widely understood facts, and many people have changed their everyday behavior in a rational effort to avoid infection. This leads to the obvious question: Are the COVID restrictions causing the economy to tank, or is it simply people’s behavior during a pandemic? Is it regulation or free market forces under COVID?
A number of nimble economists have already started to research this question, and the results suggest that regulations have had only a modest effect on the economy. For example, Austan Goolsbee and Chad Syverson (2020) of the University of Chicago Booth School of Business conducted a study that looked at consumer behavior within commuting zones that crossed boundaries with different restrictions, and they found that consumer traffic dropped sixty percent but that legal restrictions accounted for only seven percent of the drop. Similarly, a study by Harvard University researchers Edward Kong and Daniel Prinz (2020) published in the Journal of Public Economics looked at the effects of a number of state COVID policies on unemployment claims in March. They found that restaurant and bar closings accounted for 6.0 percent of unemployment claims, and nonessential business closures accounted for another 6.4 percent of claims. Other policies, including stay-at-home orders, school closures, bans of large gatherings, and emergency declarations had no significant effect on unemployment claims. So, this study also suggested that state coronavirus public health policies had only a modest effect on the economy.
The evidence presented here is consistent with a growing set of studies that find that state restrictions do not explain a large share of this economic decline. In the U.S., a number of papers have documented that economic activity began its steep decline prior to the introduction of [state restrictions] … and that it has not recovered in states that have relaxed their restrictions. (Kong and Prinz 2020, 9)
“It’s the Virus, Stupid”
If state public health interventions are not the explanation for the downturn in the economy, then we are left with the obvious alternative: it is the virus itself. If you are of a mind to turn a global pandemic into a political issue, it is easy to blame the closing of restaurants, bars, and nonessential businesses for the economic downturn, but the facts don’t support that view. Furthermore, you don’t have to be a social scientist to see evidence of why the economy will continue to slump until the virus is controlled. Here are just a few examples:
Online food ordering. One of the most obvious signs of the virus’s effect can be seen in the way we get our food. Throughout the pandemic, grocery stores never closed. There are restrictions on how we behave in the store, but for obvious reasons, not a single governor or mayor closed grocery stores. Nonetheless, many people have stopped shopping in person. Meanwhile, Instacart and other food delivery services have shown enormous growth since the pandemic. According to a recent trade report, online grocery shopping had a total of $1.9 billion in sales in August of 2019. In March of 2020, sales were at $4.0 billion, and they hit a peak of $7.2 billion in June. Of course, many restaurants have been closed, and everyone is eating at home much more often than before the pandemic. But that does not explain the dramatic shift to food delivery rather than shopping at the grocery store.
Airline industry. Like the grocery store case, airlines are not being strongly affected by government restrictions, and yet they are experiencing devastating losses. According to a report in Forbes magazine, the five largest airlines, which collectively account for 73 percent of U.S. air traffic, lost a total of $11.8 billion in the second quarter of 2020. Based on what we know about SARS-CoV-2, an airplane is an almost perfect environment for the spread of infection. Some things cannot be changed. Airplanes cannot help but be enclosed spaces. Furthermore, the change that would be the most helpful—lowering the capacity of the flights—has a direct relationship to profits. Forbes magazine publishes a master list of airline COVID policies, which was most recently updated on August 31. At that time, only five airlines—Alaska Airlines, Delta, Hawaiian Airlines, JetBlue, and Southwest—were blocking center seats. All the other airlines were flying full airplanes. Masks are required, and the airlines are disinfecting cabins and taking other precautions. But it is obvious the airlines are in financial difficulties caused by a lack of demand rather than by government regulation. Many of my friends had plans for international or domestic travel in the spring and summer of 2020, and in the first weeks of the pandemic, they spent hours on the phone or online canceling reservations and negotiating with airlines to get refunds or credits for future travel.
Government regulations have had some effect on the airlines industry, but most of that has come from other governments rather than our own. Due to the high rates of infection in the United States, Americans are not welcome in the European Union or the United Kingdom. Other countries, such as Ireland, will allow U.S. travelers into the country but require a quarantine for fourteen days upon arrival. To state the obvious, it is our lack of control over the virus and not our state and local regulations that are keeping us from vacationing in Europe.
Sports and entertainment. In early October, Regal Cinemas, the second largest theater chain in the United States, announced it would be temporarily closing all of its theaters in the United States, the United Kingdom, and Ireland. Regal had reopened its theaters only two months earlier after five months of closures. Sports and entertainment venues have been affected by state and local regulations governing seating and room capacity, and in addition the coronavirus has delayed the release of new films. The Regal decision came soon after MGM/Universal announced it would be delaying the release of the latest James Bond movie to April of 2021. But, as in the case of airlines, much of the problem is likely to be the lack of customers. Especially in an age when we have access to endless amounts of excellent entertainment via Netflix and other streaming services, the added benefits of a big screen and surround sound are insufficient to get people out of the house. My local theater is open again, but I don’t know anyone who is going.
The National Basketball Association created a remarkably successful bubble at Disney World that allowed them to safely complete the 2019–2020 season. The National Football Association began their season on time, but some games have already been postponed due to players testing positive for COVID. In addition, the Tennessee Titans experienced a substantial outbreak. Major League Baseball came back for an abbreviated season, and although several top European players chose not to participate, the U.S. Open Tennis Championships were successfully completed in New York. But in all these instances, there were no audiences in attendance. As a result, all of these sports have experienced financial setbacks.
Broadway remains dark until at least January of 2021. Local repertory theaters in my area have canceled the 2020–2021 season, and like a number of other music venues, the U Street Music Hall in Washington, D.C., has permanently closed due to the coronavirus crisis.
The number of people who attended the White House ceremony for Judge Amy Coney Barrett on Sept. 26 and who later tested positive for the coronavirus has now reached at least 11. https://t.co/s20PyqJBGr
— NYT Graphics (@nytgraphics) October 6, 2020
All of these sports and entertainment businesses are affected by state and local public health mandates limiting the size of gatherings, but as the research cited above suggests, it is likely the government restrictions are less influential than consumers’ rational fears of getting infected. If anyone needed a reminder of the danger of large groups of people, the recent outbreak at the Rose Garden introduction of Supreme Court nominee Judge Amy Coney Barrett shows the risks. As of this writing, according to the New York Times, at least eleven people who attended that event have tested positive for COVID-19, including the president of the United States. There were both outdoor and indoor components to the Judge Barrett event, but the gathering far exceeded the Washington, D.C., fifty-person guideline. Furthermore, very few people wore masks, evidently assuming they were protected by the White House testing protocol. That turned out not to be the case.
Although not often mentioned, age has been an important factor in the economic impact of COVID-19. By now we all know that younger people are much less likely than older people to show serious effects of COVID-19. But young people differ from older people in another important way: they have less disposable income. Ours is a consumer economy, and as result, the health of the economy depends on people buying and selling goods and services. Young people are much more likely to be saddled with student loans and other debts and have not yet hit their peak earning years. In contrast, older people generally have greater wealth, fewer debts, and more time to enjoy their financial success. Unfortunately for the economy, many older people are making the completely rational decision to avoid many of the environments where they might spend their money (see the list above). Indeed, at the outset of the pandemic, the U.S. personal savings rate spiked from an average of 7 percent of disposable income to an all-time high of 33 percent. Similarly, a recent study shows that many consumers used their one-time stimulus checks under the Cares Act to pay down credit card debt (Coibion et al. 2020), and consistent with that report, Federal Reserve data shows that credit card debt fell sharply in the second quarter of 2020. More savings and less debt are good for the individual consumer, but they starve the economy of funds that would otherwise be paying for goods and supporting employees’ salaries.
Finally, it is clear from the experience of other countries that it doesn’t have to be this way. Ironically, our reluctance to impose severe restrictions early in the pandemic has brought us a sustained weak economy with no end in sight. Other countries reacted strongly and are now enjoying much more freedom and revitalized economies. After the most severe quarantine in history, China has been open since early April. Wuhan nightclubs are full again. New Zealand had a strong and unified response to the coronavirus and went more than a hundred days without community spread. There was an outbreak in Auckland in August that required the reimposition of a lockdown in the city, but in early October Prime Minister Jarcinda Ardern announced that Auckland could once again join the rest of the country and enjoy freedom from coronavirus restrictions. Thailand has reopened schools, restaurants, and bars, and France reopened restaurants, bars, and cafés in June. A recent uptick in infections has necessitated mandatory mask use in some areas, but for now France remains open.
The response to the SARS-CoV-2 pandemic has been variable across countries, as have the results of those efforts. But it seems clear that the quickest way to bring an economy back is to beat the virus. On October 5, President Trump, while suffering from COVID-19 himself, said “Don’t be afraid of COVID.” The hosts of the radio station I appeared on where urging a similar “tough it out” message. Unfortunately, any business person will tell you these are not winning marketing strategies. Imagine a shop owner who makes little effort to make customers feel comfortable and instead simply says, “Suck it up.” It is equivalent to saying, “This product is not very good, but you should buy it anyway.” In the free market experiment of the coronavirus pandemic, that line won’t work. The economy will not fully come back until it is safe to enter the marketplace.
In the 1992 campaign that won Bill Clinton the presidency, political strategist James Carville famously popularized the phrase, “It’s the economy, stupid,” to identify the most important issue of that campaign. Today, as the economy is suffering the effects of a global pandemic, Carville’s line could be revised as “It’s the virus, stupid,” and it would largely mean the same thing. Removing state and local coronavirus restrictions will not bring the economy back. Only getting rid of the virus will do that. We would all be better off if we could agree to work toward that goal.
- Coibion, Olivier, Yuriy Gorodnichenko, and Michael Weber. 2020. How did U.S. consumers use their stimulus payments? SSRN Electronic Journal. Online at https://doi.org/10.2139/ssrn.3675543.
- Goolsbee, Austan, and Chad Syverson. 2020. Fear, lockdown, and diversion: Comparing drivers of pandemic economic decline 2020. SSRN Electronic Journal. Online at https://doi.org/10.2139/ssrn.3631180.
- Kong, Edward, and Daniel Prinz. 2020. Disentangling policy effects using proxy data: Which shutdown policies affected unemployment during the COVID-19 pandemic? Journal of Public Economics 189: 104257. Online at https://doi.org/10.1016/j.jpubeco.2020.104257.