The federal government’s response to the coronavirus pandemic could turn out to be a policy mistake of epic proportions. The success of the current response depends on the development of an effective vaccine in record time which allows the country to quickly return to its pre-virus economic boom. Should reality fall short, Congress will have created a massive amount of new federal debt with no plan B.
Policies that provide temporary support to shuttered businesses keeping their non-working employees on the payroll are tremendously expensive. They will only work if the public-private initiatives underway can engineer a quick reduction in the virus spread that allows the nation to return to business as usual, which is why the success of the government’s response hinges on the rapid development of an effective vaccine.
History suggests that expectations of a quick vaccine are heavily optimistic. After almost 40 years of research, there is no vaccine for the HIV. Similarly, there are no vaccines for SARS, MERS, or the common cold. It took 10 years to develop a vaccine for the Avian H5N1 virus. Moreover, vaccines do not offer complete protection. According to the CDC, the current seasonal flu vaccine is estimated to be only 45 percent effective.
The probability of death after contracting COVID-19 is unknown but not insubstantial. In Connecticut, 7.6 percent of all confirmed COVID-19 patients have died. Death rates are similarly high in Massachusetts (5.3 percent), Louisiana (6.2 percent), and Minnesota (7.5 percent). Once asymptomatic cases are accounted for, experts expect the average mortality rate to be much lower, perhaps under 1 percent. Still, without an effective vaccine, the overall risks of the coronavirus are material because a person with the coronavirus likely infects on average between two and 2.5 other people. Without an effective vaccine, informed consumers are likely to demand social distancing mitigation once businesses reopen — with or without a government social-distance mandate.
If social distancing remains the only practical mitigant for the foreseeable future, then many businesses will be forced to adapt to remain viable. It is hard to imagine that airlines, cruise ships, mass transit, eat-in restaurants, sporting events, and all other types of activities that rely on large concentrated gatherings of people will be able to resume pre-crisis operations profitably in this new environment. Taxpayers cannot afford to continue to support these businesses payrolls indefinitely. If the probability of survival of these types of businesses is remote in a COVID-19 world, it is shortsighted for Congress to be mortgaging America’s future on programs that freeze these potentially obsolete businesses in time, betting on the unlikely possibility that they can quickly and profitably be revived. Congress’s failure to devote at least some of these resources to developing a plan B — a plan that does not rely on the timely development of a successful vaccine — could end up being an expensive policy mistake.
It is not surprising that funding for programs that maintain the businesses and lifestyles of voters harmed by the virus through no fault of their own garner unanimous political support. Politicians of all stripes favor programs that grease their own reelection chances, especially when the inevitable spending constraints imposed by shortsighted bailout programs are realized in the future.
However, while there is no doubt the economic transitions catalyzed by the COVID-19 pandemic will be painful for many, they are also unlikely to be avoidable. Congress and the executive branch need to rise above narrow self-interest and focus more attention on formulating a plan B with programs designed to transition the economy so it can continue grow and prosper should the world fail to develop an effective coronavirus vaccine.
This article first appeared at the American Enterprise Institute.