The Economic Impact of the Virus

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A monument near the office where I worked in Washington, D.C., until Sunday bears this quote by the Argentinean Jose Narosky: “In war there are no unwounded soldiers.”

We can say the same thing about the warlike shock of the COVID-19 pandemic. Many of us have suffered already. We will all suffer in some way. If we learn from the record, however, we can take steps to minimize the impact.

My basic message is that there is a trade-off. Slowing the spread of the virus will extend the period in which the virus is present and may not reduce the number of people who are infected. What isolation will do, however, is reduce the death rate by lessening the overwhelming of Suffolk County hospitals and clinics. Britain is a week or more ahead of the United States, and the hospitals are pulling in final-year medical and nursing students; they are also bringing back recently retired doctors, including my own sister, who are at higher risk because of their age.

We want to avoid getting to Italy’s desperate situation, where crowded hospitals are making hard triage decisions, not accepting patients over 80, who are left to be cared for, and often die, at home. Staying at an understaffed hospital with too many diseased, highly contagious patients could be a death sentence anyway. They may be better off at home.

When I was chief economist for three New York City comptrollers, under Mayors Dinkins, Giuliani, and Bloomberg, I prepared the official estimates of the economic impact on New York City of the terrorist attacks on the World Trade Center in 1993 (nearly $1 billion) and Sept. 11, 2001 (approximately $90 billion). The 9/11 attacks resulted in a $20 billion package for New York City, and large investments and annual expenses in public security, including security stops at airports.

When a major shock happens, governments need to act as soon as possible. Yet officials need time to process the challenge so that they prepare in the right way. Beds in New York City hospitals, for example, were emptied out and fully staffed to care for injuries after the 9/11 attacks, but the wounded never came. This time, the COVID-19 trauma will indeed require hospitals and personnel. Their preparedness will determine the number of deaths.

The lesson from the crash of 2008 is that the emphasis should be on putting money in the hands of consumers so they can keep the wheels of commerce turning. Senator Mitt Romney has suggested giving every American $1,000 to address the coming recession. He has the right idea.

For more than a year, I have been senior economist for the Joint Economic Committee of the Congress, including when Representative Carolyn Maloney was vice chairwoman. I prepared a report on Trump’s China tariffs, the impact on the U.S. retail supply chain, and the plight of that sector. This made me an early student of the economic impact of the coronavirus.

In early March, the World Bank was still projecting 2.5-percent global growth in 2020, above the “post-crisis” low in 2019. The International Monetary Fund also forecast growth, but at a slower rate. Morgan Stanley predicted that even with a pandemic, growth would exceed 2 percent; the Organisation for Economic Co-Operation and Development projected that a pandemic would cut the growth rate in half. The verdict of the stock and bond markets since then has been profoundly negative. In round numbers, the Dow peaked at 29,400 on Valentine’s Day. By the morning of St. Patrick’s Day the Dow was struggling to stay above 20,000. One-third of the value of this market was lost in a month. Three years of growth in the Dow disappeared.

On Monday, Gregory Daco of Oxford Economics said, “We’re calling the recession.” A Financial Times survey of economists was headlined “Global Recession Already Here.” The Federal Reserve’s two rate cuts, down 1.5 percentage points, just seem to have added to the financial panic.

The United States is fortunate that Asia and European countries faced the virus first. Italy’s experience is shocking because the death rate is much higher than China’s. China was able to build a new hospital in Wuhan in just 10 days. Italy was slower to act and has a considerably older population.

A model popularized by Nicholas Kristof of The New York Times shows why early action is crucial. It assumes 100 million U.S. infections by the coronavirus. With early intervention, the number of U.S. deaths is kept to 324,000, a death rate of 0.3 percent. If action is delayed, however, the number of deaths triples to one million, a death rate of 1 percent of infections. This is a conservative estimate based on what happened in Italy, where as of Monday the number of reported cases was 27,980 and the deaths 2,158, a frighteningly high death rate of 7.7 percent. Italy’s slow action was especially dangerous for its elderly population; it has the second-highest percentage of elderly people in the world. Japan has the highest.

France (2 percent) and Spain (3 percent) have lower death rates in part because they learned from Italy and have taken extreme measures and because their population is younger. Death rates are well below 1 percent in two countries that acted decisively to slow the spread of the disease — Germany (0.2 percent) and South Korea (0.9 percent). These may be the models to follow.

By Monday, more than 183,400 people had been reported infected with the coronavirus worldwide and 7,200 had died from it. In the United States more than 3,800 cases have been reported nationwide and 60 deaths, of which one-third were residents and staff in one nursing home near Seattle. The numbers for New York State were 1,374 reported cases as of Tuesday and 12 deaths.

The numbers could not be clearer. Active intervention saves lives. Governor Cuomo and Mayor de Blasio are doing the right thing by closing schools, restaurants, and bars. Intervention is already too little, too late, especially the lack of testing kits. What is needed now is effective mitigation — decisive action to slow down the spread of the virus.

Economically, Suffolk County is vulnerable because jobs here have not been growing in the past year, despite the fact that New York State is performing above the national average. The coronavirus and the stock market crash that it (and the return of excessive risk-taking by financial institutions) caused have not been helping. Even if the Fed’s cuts in interest rates to .25 to 0 percent help the market over time, public attitudes toward the market and the economy have shifted negatively.

East Hampton will benefit economically in the short term from the fact that many New Yorkers want to get away from the city ASAP, so rentals should be strong for the spring. When they get here, however, they will probably want to self-isolate. Year-round residents may be just as grateful if well-traveled out-of-towners stay in their homes. It will be many weeks before our retail stores, restaurants, and bars return to 2019 levels of activity.

How badly the East End and Suffolk County will be affected will depend on how well this area slows down the spread of the disease and increases the capacity of its hospitals and other health-related facilities. Imagine a scenario in which three times more patient beds and equipment such as ventilators are required than East End hospitals and clinics can at present provide. What kinds of planning and actions must we do now to provide for new isolation centers? How does one feed and care for the overflow while protecting those who are caring for this population? What facilities exist now that in April and May could be used as auxiliary care facilities?

If a patient decides to stay home, what kinds of help are needed? Do we need to have more people trained on an emergency basis to look after homebound patients? What equipment will they need? What substitutes can be prepared if ideal equipment is not available? Stay tuned to The East Hampton Star, which will doubtless get answers to these questions from local medical staff.

In a war on a disease, we must all be soldiers.


John Tepper Marlin, Ph.D., has been a Springs resident since 1981.

About D. Posnett MD

Emeritus Prof. of Medicine, Weill Cornell Medical College
This entry was posted in Coronavirus, economy, Health Care, Trump, Uncategorized, Zeldin and tagged , , , . Bookmark the permalink.

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