COVID-19: Economic impact, human solutions
The COVID-19 pandemic is confronting every level of the U.S. economy with an unprecedented challenge, and the government must mount a sustained, ambitious economic response lasting months and perhaps years, UC Berkeley economists said in an online forum today.
In the latest event in the Berkeley Conversations: COVID-19 series, some of the nation's leading economists and policy experts said the effort will require expansive additional measures to relieve workers, state governments and businesses. And they agreed that the recovery program must focus on workers and communities of color who are bearing the brunt of the crisis.
The recovery program likely will cost trillions of dollars, on top of relief measures already approved by Congress and President Donald Trump. But, they said, aggressive investment and well-designed policy could bring the economy back more quickly and with less long-term distress for workers and businesses. They concluded that the nation can afford the investment.
"We're definitely headed to something much deeper than the Great Recession, and comparable to Great Depression in depth," said Jesse Rothstein, director of Berkeley's Institute for Research on Labor and Employment (IRLE). "What we don't know yet is whether we'll be able to bounce back quickly or whether it will linger on for a decade or more. … The greater extent that we can keep workers attached to their firms and keep the firms afloat, the more likely it is it will bounce back quickly."
"What's going to be essential is the government response—the scale, the rapidity of the response," said Berkeley economist Gabriel Zucman, whose work on wealth distribution and tax policy has attracted international attention.
Berkeley Conversations: COVID-19 is an online discussion series organized by UC Berkeley that convenes world-class scholars to discuss a range of issues critical to the pandemic and recovery. Friday's event was sponsored by the Goldman School of Public Policy and Berkeley's Opportunity Lab. It was recorded and archived for public viewing at no cost.
The virulent novel coronavirus emerged in China in November 2019, and in just a few months has advanced across the planet. Over 100,000 people have died, and millions have fallen seriously ill. To check the spread of the virus, people around the world have isolated in their homes and business has shut down. There is no precedent in U.S. history for such a sudden economic shock.
Data discussed at the forum underscored the extent of COVID-19's impact: As much as a third of the U.S. economy may be shut down. Real unemployment may be at 25%, and millions are filing for unemployment relief every week. Among members of Unite Here, a union representing 307,000 hotel and restaurant workers nationwide, 98% are out of work. California may lose $20 billion to $50 billion in tax revenues, and this will come from its $200 billion annual budget.
Washington has answered with a $2 trillion relief package, and the Federal Reserve Board this week announced $2.3 trillion of additional virus relief for small businesses and local governments.
Still, the experts said, more will be needed to offset the damage. Economist Hilary Hoynes, co-director of the Opportunity Lab, cited three immediate priorities: expanded support under the food stamp program, increased support for renters and increased aid to state governments.
But political scientist Henry Brady, dean of the Goldman School of Public Policy, put things in perspective: The U.S. has a $22 trillion economy, and it had been in good health before the pandemic hit.
This suggests that the nation has the capacity to invest in recovery, the experts said. But carefully targeted policy will be essential. A priority will be to assure that policy addresses the critical needs of low-income people and communities of color, who have been disproportionately hurt by the pandemic.
"Based on the fragmentary data that we have coming out of New York City, black and Latino Americans are dying at twice the rate … of white Americans," said Ellora Derenoncourt, who will start in the fall as a Berkeley assistant professor of economics and public policy. "Most Americans can't work from home. That's even more true of black and Latino workers. And so they are really bearing the brunt of this crisis."
Some lawmakers have suggested that the United States must move as quickly as possible to return to normalcy and restart the economy. But the Berkeley experts suggested pitting public health against the economy is a false choice. Rather, they said, the two are inseparable: Assuring public health is the first step toward a sustainable recovery.
"This is a moment when we realize that we're all in this together," Brady said. "When we do good things for people, like providing children with food stamps, they turn out to have better lives as they go forward. … We have to think about how, by investing in people, we actually make the society better."