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Insuring the Survival of Post-Pandemic Economies

Alarmingly, a growing chorus in the US – including President Donald Trump – is assuming that new "stimulus" legislation will allow the COVID-19 lockdown to be eased as soon as Easter. In fact, the pandemic demands not only vast government spending but also intervention, including a temporary state-led reorganization of the entire economy.

NEW YORK – Lockdowns of entire cities. Panic in financial markets. Bare store shelves. Shortages of hospital beds. The world has entered a reality unknown outside wartime.

By mandating that people isolate themselves at home, policymakers hope to slow, and then reverse, the rate at which COVID-19 is spreading. But a lockdown alone, or a burst of money creation, will not stop the pandemic or save our economies. The $2 trillion economic-rescue package soon to be adopted by the United States is a case in point. The US needs government spending on the scale that it envisions, but it also needs government intervention to address a deepening public-health crisis. As such, many of the “stimulus” bill’s provisions appear misguided, some woefully so. Others move in the right direction, but are too piecemeal.

But, alarmingly, many policymakers – including US President Donald Trump – are simply assuming that the legislation will allow for the lockdown to be eased as soon as Easter, ignoring the threat COVID-19 poses not just to the elderly, but also to younger people. According to the New York Times, around 40% of those “sick enough to be hospitalized” by the disease in New York have been between the ages of 20 and 54, suggesting that the stress on health systems will worsen significantly before it improves. The possibility of millions dying as the economy is crippled justifies substantially scaling up the extent and scope of government action. Thus, the government’s response should be viewed as an unprecedented form of short-term systemic insurance for our lives and livelihoods. And, given the absolute value we place on both, citizens and governments should be prepared to pay what might appear an extravagantly high premium.

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