The coronavirus crisis will cost the U.S. about $16 trillion, according to a new analysis published in the Journal of the American Medical Association by former U.S. Treasury Secretary Lawrence Summers and Harvard University economist David Cutler.
Roughly half the cost is associated with a reduction in gross domestic product that will linger for years, with the other half coming from health-oriented issues including premature death and long-term impairments. If the estimate is accurate – and the economists say they are “optimistically” assuming the pandemic will have been largely contained by next fall – Covid-19 will end up being far more costly than the Great Recession.
“Output losses of this magnitude are immense,” the authors say. “The lost output in the Great Recession was only one-quarter as large. The economic loss is more than twice the total monetary outlay for all the wars the US has fought since September 11, 2001, including those in Afghanistan, Iraq, and Syria. By another metric, this cost is approximately the estimate of damages (such as from decreased agricultural productivity and more frequent severe weather events) from 50 years of climate change.”
Given the staggering cost, policymakers should reconsider the government’s approach to health care, Summers and Cutler say. “Currently, the US prioritizes spending on acute treatment, with far less spending on public health services and infrastructure,” they write. “As the nation struggles to recover from COVID-19, investments that are made in testing, contact tracing, and isolation should be established permanently and not dismantled when the concerns about COVID-19 begin to recede.”