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Nicklaus: For a quick economic recovery, we need widespread coronavirus testing

Nicklaus: For a quick economic recovery, we need widespread coronavirus testing

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We’re about to see some truly horrible economic numbers, starting with Friday’s jobs report.

Many forecasters expect unemployment to top 20% soon. Gross domestic product is expected to shrink at a 36% rate between April and June.

How should we think about numbers that were unimaginable a couple of months ago? James Bullard, president of the St. Louis Federal Reserve Bank, says we should consider them a victory, but figure out how to reverse them soon.

Shutting down large chunks of the economy, Bullard has said in several recent speeches, was the right thing to do. We saved lives by reducing opportunities for the coronavirus to spread.

The economy, though, doesn’t have a pause button. We can’t just wait a few weeks and expect things to resume the way they were. We’re already seeing bankruptcies and permanent layoffs, and such damage will increase as the shutdown drags on.

DEFICIT DEBATE: Some Republicans in Congress are citing the ballooning federal deficit to argue against further coronavirus relief spending. Jim Gallagher is worried about the long-term cost of all the red ink, but David Nicklaus doesn't see any ill effects so far.

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“We should think of the second quarter as the period when this task needs to be completed,” Bullard said Tuesday in a National Association of Business Economists videoconference. If too many businesses remain closed past July, he added, “that kind of policy is going to create all kinds of new problems that you don’t really want to be creating.”

Bullard isn’t siding with protesters who demand an immediate end to stay-at-home restrictions. He wants a “more risk-based and granular policy” that would still restrict some activities.

Phased reopenings announced by some governors, including Missouri’s Mike Parson and Illinois’ J.B. Pritzker, look like the kinds of policies Bullard is talking about, but they lack one key element.

He would like to see widespread testing, and not just for people who are sick or have been exposed to COVID-19. Offices and factories could safely reopen if businesses could test all their workers.

“From an economic point of view it’s an information problem,” Bullard said. “If we knew where the virus was at all times we’d have a lot better ability to control its spread.”

Testing could also boost confidence in businesses that serve the public. “If you and I are going to do a transaction, I want to be sure that I can go to your restaurant or get a haircut and not get sick,” Bullard said. “That isn’t something the health care industry normally thinks about.”

According to Johns Hopkins University, the U.S. has administered 7.5 million COVID-19 tests so far, enough for 2.3% of the population.

Widespread workplace testing would require hundreds of millions of tests, but Bullard has an “econ 101” solution for scaling up: The government could reimburse companies for the cost of producing and administering tests, while encouraging them to sell as many as possible at a competitive price.

“You’re going to get totally saturated with tests,” Bullard suggested. “You’d be able to control the virus in a way that would allow you to go back to ordinary economic activity and you could end the crisis.”

Timothy McBride, a health care economist at Washington University, thinks Bullard’s approach is sound. “You have to try to get the right balance between public health and livelihoods,” he said. “You can’t shut down the economy for a long time or you go into a Great Depression.”

This isn’t about a trade-off between pocketbooks and public health; a long-lasting depression would be bad for both. For a Congress that has spent more than $2.5 trillion addressing the costs of this pandemic, a few tens of billions for testing would seem like a prudent investment.

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