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Economy & Business

What Is The Economic Cost Of Social Distancing?

SCOTT SIMON, HOST:

There's a heavy economic cost to slowing the spread of the coronavirus. Businesses are shut. More than three and a quarter million people just joined the ranks of the unemployed. Tens of millions more are hunkered down. Public health experts call for patience. But as the economic pains begin to mount, there are voices calling for a middle ground between lockdown and just letting the virus run its course. NPR's chief economic correspondent Scott Horsley joins us now.

Scott, thanks for being with us.

SCOTT HORSLEY, BYLINE: Good morning.

SIMON: Some staggering unemployment numbers in the U.S. What do they tell us now?

HORSLEY: There's no question the economy is taking a big hit. The next few months are likely to show the sharpest slowdown for the U.S. economy that we've ever experienced, and this is a result of deliberate choices we're making. So it's not surprising. Some people are asking, is it worth it? You know, are these strict public health measures we've adopted more costly than the coronavirus itself?

SIMON: And how are the economists with whom you have been speaking answering that question?

HORSLEY: We are in what Anthony Fauci has called unchartered waters here, but everyone is looking for some navigational buoys. I talked yesterday with MIT economist Emil Verner. He and a couple of colleagues looked back at the 1918 flu pandemic. That's obviously not a perfect parallel with our situation, but there are some similarities. Back then, there was no vaccine for the flu and no built-in immunity - just like with the coronavirus. And Verner says a lot of cities in the U.S. adopted policies like the ones we're seeing today.

EMIL VERNER: We were able to dig up a bunch of old newspaper articles, and sometimes we're kind of going to ourselves, is that about today or about 100 years ago?

HORSLEY: Back then, they were shuttering schools and theaters. They outlawed public gatherings. Verner says some cities, like Omaha and Spokane, were more aggressive than others, like Boston and Pittsburgh, so it gives us kind of a natural experiment to see how that played out.

VERNER: And what did they find?

HORSLEY: Not surprisingly, the cities that acted quickly and forcefully to enforce what we would now call social distancing measures had fewer deaths from the flu. What's striking, though, Verner says is they also perform better economically. And that's because the pandemic itself takes a toll on the economy. People don't shop and spend the way they would otherwise in a raging pandemic and a serious outbreak like what we saw in 1918 leaves long-lasting economic scars.

VERNER: There doesn't appear to be a tradeoff between saving lives and supporting the economy. If anything, the data suggests that these cities that intervene more aggressively actually did better in terms of their economy in the year after the pandemics.

HORSLEY: Now Verner says the most aggressive cities left their social distancing policies in place for 100 days or more.

SIMON: Well, I have to ask. So are we all staying home and keeping socially distant for - I don't know - another 85 days?

HORSLEY: Not necessarily. I talked to another economist this week, the Nobel Prize winner Paul Romer. He thinks there could be a middle path here. Right now, we're telling virtually everyone who doesn't have an essential job to just stay home. If instead you could target that message just to the people who are infectious, you could still slow the spread of the pandemic while also leaving most of the economy open for business. Now, this would obviously require a massive increase in our ability to test people for the coronavirus. You'd have to test everyone, and they'd have to keep getting tested every couple of weeks. But Romer believes if we made a serious effort, this is something that could be ramped up in the next month or two.

PAUL ROMER: If you ask why we're stuck with such horrible choices right now that kill people or kill the economy, it's because we didn't invest in the past. Bygones are bygones, but let's not repeat that mistake right now. Let's invest as hard and fast as vigorously as we can so we got some better choices.

HORSLEY: Otherwise, Romer says, we're going to continue to face this very divisive political tug of war between the people who are arguing for keeping very widespread social distancing orders in place and those, like President Trump, who insist it's time to reopen the economy.

SIMON: NPR's Scott Horsley, thanks so much.

HORSLEY: You're very welcome. Transcript provided by NPR, Copyright NPR.