Trump would hurt US economy by trying to restart it
(BLOOMBERG) – President Donald Trump seems to think he can restart the US economy by scaling back some of the restrictions on work, commerce and social interaction that have been put in place to slow the spread of the coronavirus.
“America will again – and soon – be open for business,” the president said on Monday (March 23). “Very soon, a lot sooner than three or four months that somebody was suggesting. A lot sooner. We cannot let the cure be worse than the problem itself.”
Mr Trump said on Tuesday his goal would be to have a return to normal by Easter Sunday, which is April 12.
He’s wrong. Trump is deluding himself if he thinks that he can step behind a podium and reopen the economy.
First, there is the practical problem that the economic shutdowns have been ordered by governors and mayors. Stay-at-home directives in California, New York, Chicago and Washington, D.C. have captured much of the media attention. But my hometown of Kansas City, Mo., told its residents to stay home and non-essential businesses to close last Saturday. Now I live in northern Virginia, just south of Washington, D.C., and received an email from my barbershop Tuesday morning announcing expanded hours during the day as a response to the governor’s decision to close recreational and entertainment businesses for 30 days, effective at midnight.
As of Tuesday morning, at least 163 million people in 17 states, 14 counties and eight cities are being told to shelter in place. That’s roughly half the US population, and growing.
Less than two weeks ago, governors and mayors began taking matters into their own hands and issuing shutdown orders, frustrated by the lack of a reasonable, coordinated plan from Washington to ensure public health. The president does not have the necessary credibility with many of these state and local officials to convince them to rescind their guidance to businesses, households and schools.
But even if he did, he still couldn’t restart economic activity at the levels the US enjoyed just two weeks ago. Many people are frightened about the virus, and Trump won’t be able to assuage those concerns. Because we are worried about catching the coronavirus, my family wouldn’t go to a crowded restaurant for dinner tonight regardless of what the president might say. Would Trump be able to convince you to go to a movie theater or a concert?
Two weeks ago, my spring calendar was filled with conferences and speaking engagements. Those have all been cancelled, and along with them the airline tickets and hotel reservations I had made. Even if Trump calls off the shutdown once his “15 days to slow the spread” campaign expires, those tickets and reservations will not be rebooked and those conferences will not resume as planned. Trump can’t just restart economic activity in these sectors with a wave of his hand.
A warning to the president: Trying and failing to reopen the economy before economic activity is organically ready to resume could have dire economic consequences.
Many people would ignore Trump’s directive to restart economic life, but not all would. And if the premature resumption of economic activity resulted in significant public health consequences – more cases, more deaths, hospitals more overwhelmed – by allowing the coronavirus to spread further and faster, the president will have lost control.
An even more dire public health crisis would bring a much more severe and lengthy economic downturn. And a more dire public health crisis brought on in part by the president’s decision to reopen the economy too early would have even worse economic consequences because the government would have lost the credibility to inform Americans about the virus.
Many people would be afraid for longer to resume normal economic life regardless of what the government tells them. People would avoid dining out, shopping, taking public transportation, traveling and working from their offices for longer than would be necessary, because there would be no federal authority that could credibly give them the all-clear.
More and better information on the virus is desperately needed. People will feel comfortable resuming economic activity when the facts – importantly, from more and better testing – suggest that it is reasonable to do so. Trump can’t substitute his pronouncements for those facts, because many people, not to mention state and local officials, simply wouldn’t respond to his message.
But the president should be careful. The more people who would take his word for it, the worse the economic downturn could become.
Michael R Strain is a Bloomberg Opinion columnist. He is director of economic policy studies and Arthur F Burns Scholar in Political Economy at the American Enterprise Institute. He is the author of “The American Dream Is Not Dead: (But Populism Could Kill It).”
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