Editor’s note: This commentary is by Mark Klinedinst, of Essex Junction, a emeritus professor of economics at the University of Southern Mississippi.
Art Woolf’s column on July 17 correctly pointed to the need for more congressional stimulus to keep the economy afloat here and across the country. On top of the tremendous suffering caused to families and communities from the ravages of Covid-19, the economy’s downward slide is compounding the suffering, but this does not need to happen.
Certainly it was smart to close like we did in Vermont and other parts of the country to slow the spread. As Paul Krugman of the New York Times put it, we went into “the economic equivalent of a medically induced coma, in which some brain functions are temporarily shut down to give the patient a chance to heal,” which we now need to at least partially reverse (NYT, April 2, 2020). We can stimulate the economy enough now to avoid the massive bankruptcies and unemployment that is likely to inflict even more damage to our communities. The cost of not stimulating/supporting the economy is going to be much greater than the money we need to spend now with a stimulus.
A recent letter by a group of economists that included Nobel laureates and recent members of the Federal Reserve pointed to a devastating loss to the U.S. of $16 trillion over the next decade. This loss will mean massive unemployment and numerous business closings.
A study done back in the 1980s pointed to an extra 37,000 deaths in the U.S. for every one percentage point increase in the unemployment rate (“Corporate flight: The causes and consequences of economic dislocation,” B. Bluestone, B. Harrison, L. Baker, 1981, Center for Policy Alternatives). Adjusting that 1981 number for our now larger population would mean approximately 50,000 extra deaths from suicide, alcohol abuse, etc., for every 1% increase in the unemployment rate on top of the terrible losses from Covid-19. With the national unemployment now about 10 percentage points higher than before, this implies, we will have hundreds of thousands of extra deaths from such high unemployment.
This economic calamity will hit almost all parts of our economy, but families of color will be particularly hard hit. Loss of jobs and many unable to pay for their housing or food will lead to more dislocation and suffering. The lines we see now for food support are only going to get worse without this extra aid.
The states now that are on the front lines in fighting this pandemic will be forced to lay off emergency personnel, firefighters, and other essential and crucial workers. Congress could help the states balance their budgets. The Federal Reserve could also buy bonds from the states that are long term at low rates, and similar to the Paycheck Protection Plan there could be forgiveness. The Fed has already helped the commercial lending market from freezing up with trillions of dollars, the states are certainly no less crucial to our economic well-being. This help in a slow economy would not spur inflation but help keep a floor on the economy until we can get back to normal with effective treatments and hopefully soon a vaccine.
Just when it appears that the virus has found new virulence in parts of the country the unemployment benefits will be cut, states will lay off emergency responders and hospitals will have to shutter doors.
Please help the effort to stimulate and keep a floor on spending for households and businesses by contacting legislators, especially at the federal level to help keep us healthy and our economy as well.
