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We just got off the phone with Paul Romer, the NYU economist who won a Nobel Prize in 2018 for his research on economic growth. We thought it might be a good time to talk about the future of the economy. He scared us. But he also had a plan.
He described the current national conversation over what to do about the coronavirus as a choice between health and wealth, between either shuttering the economy and saving lives; or opening the economy and endangering millions.
But Romer believes that if the federal government pursues a new strategy, where it coordinates industry, sets up and staffs testing sites, and buys virus-fighting equipment at massive scale, we can have a way better option within a month or two.
The way he sees it, the current two choices aren't nearly as good. One is continued social distancing until scientists deliver us a vaccine available for widespread use, which could take two years. Waiting that long, Romer says, would mean "the end of the economy and life as we know it."
The other choice is returning to normal before we get a vaccine, with everybody reintegrating into work and social life at the risk of hundreds of thousands of deaths. "We're either gonna keep destroying the economy or we're gonna start killing people," he says.
Romer and Alan Garber, an economist, physician, and the Provost of Harvard University, published their alternate plan last week in the New York Times. (We reached out to Garber as well, but he's currently got a lot on his plate running Harvard because the university's president recently caught COVID-19).
Romer and Garber advocate that the federal government mobilize the nation like it's a war and implement measures that might allow us to reenter a somewhat normally functioning economy without massive loss of life.
As others have been advocating, they want the government to make COVID-19 tests universally available, done frequently, and used as a green light for each of us to reenter economic and social life. The problem, Romer says, is there are only about a hundred testing machines in the U.S. and we need at least 5,000 of them. And that "isn't going to happen if we just sit around and pray and hope," he says. He thinks it's going to require massive government funding and centralized direction. He envisions government-sponsored testing sites throughout the country.
Romer and Garber also want mass production of face masks, gloves, full-body suits, hand sanitizer, ventilators, and everything it takes to make it safer for social interaction. "It's just a tragedy that we don't have enough masks and face shields – and god help us – we may not even have enough gloves soon for people to do their work at the hospital," Romer says.
Economists usually like it when the market provides solutions. But building factories, buying machines, training workers, and doing everything else it takes to produce massive quantities of medical equipment on an aggressively short timeline will cost a lot. And, Romer says, without government intervention, companies won't do this on their own.
That's because corporate America naturally worries that demand for this equipment will evaporate once the crisis recedes and that even during the crisis, they might not be able to charge much for it. With historically high demand and limited supply, the market's natural response is sky-high prices. Everybody hates them, but high prices provide an incentive for manufacturers to produce. Yet, Romer says, "the reality is our political system, our emotions, will not let companies charge like ten times as much for the masks right now as we're trying to get a surge in production. So that's why the market can't do its job. We won't let prices do what they have to do."
With corporate America caught between a short demand spike and price controls, Romer and Garber want the federal government to step in and do whatever it takes to increase the production of testing machines and protective equipment. Romer compares it to what the government did after Pearl Harbor.
But he's frustrated by what he sees as a lack of aggressiveness in tackling the threat. Washington recently passed a $2 trillion coronavirus response package aimed primarily at helping Americans as COVID-19 and social distancing shut down our economy. The bill includes about $180 billion for health-related efforts, including $16 billion for more medical equipment. It's not enough, Romer says. He wants the government to spend about $100 billion on medical equipment and allocate additional funds for testing sites and staff.
"I mean, the investments we're advocating here, they're not inconceivable," Romer says. "This isn't like John Kennedy saying, 'We're gonna go to the moon.'"
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