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As millions more Americans file for unemployment amid an economy crippled by COVID-19, many states are lifting restrictions and reopening businesses. But is that the correct approach to reviving the U.S. economy? Paul Solman talks to Nobel Prize-winning economist Paul Romer about weighing costs and benefits and why “there are no good alternatives” to making COVID-19 testing ubiquitous in the U.S.
Once again, the hemorrhaging of American jobs was in the millions last week. The official unemployment rate is likely to spike to 20 percent by June, if that is not already the case unofficially.
And Federal Reserve Chair Jay Powell warns that we could be facing a prolonged recession that could damage growth for years to come.
Everyone wants to restart the economy. The question is how.
Paul Solman gets the views of a Nobel Prize-winning economist.
It's part of our series Making Sense.
Right now, this week, there is a choice about getting some more activity going vs. protecting lives.
Paul Romer, who won a Nobel Prize in 2018 for his work on technology and economic growth.
These days, he's focused on how to avoid an economic depression.
Really, the only way to get back to a healthy economy is to stop the death and make people feel safe.
And ending the lockdowns won't do that, he says.
We're going to have a kind of a seesaw pattern, I think, of trying to open up, realize that we haven't done anything to protect against the spread of the virus, and then pulling back.
And what we're going to just have to do is find a sustainable way to contain this virus.
That way, he's been arguing, is mass testing, everyone in the U.S. every two weeks.
If you don't know who's infectious, the only way to lock down and isolate the people who are infectious is to lock down everybody.
I think if we just test everybody and isolate the people who are infectious, we can easily suppress it, and we can do it without causing a depression.
But how can we do that, given the well-known shortages of test supplies, personal protective equipment, laboratory capacity?
Says Romer, how can we not? Just look at his model.
Each additional unit of testing frees up about eight or nine people who can go back to work.
What's the value of the work the eight or nine people can do? Man, the test is really cheap compared to what the people can do. And for people who say, well, we can't get a lot of them right now, I'm OK with that. Let's just get as many as we can right now and start to get some people back to work.
Economics is fundamentally about costs vs. benefits.
So all this testing costs how much vs. how much is added to the economy when the nine people that you were talking about go back to work.
If we can get the cost of a test down to $10, so one unit of testing per day will cost us about $3,600 per year, if that frees up nine people, then that means, at a median income of, say, $50,000, nine times $50,000 would be $450,000.
It's like a hundred-fold increase on your investment. There aren't very many investments where you get a 100-X return pretty much guaranteed.
The latest relief bill did include $25 billion for testing.
So, is $25 billion enough?
We need to commit about $100 billion a year to expenditures on testing. That's enough to get us this 23 million tests per day, or test everybody every 14 days in the United States. The $25 billion is enough to get going. It'll give us some demonstration projects.
I think we should be testing and reopen, you know, for TV, Major League Baseball. I think we should be testing everybody in nursing homes. I think we should be testing frequently everybody who's a health care provider.
Are you condemning the country for not having had the tests?
No, no, no. Bygones are bygones. I think it's a horrible mistake to worry about, you know, who do we blame, who are we going to punish, or to be thinking about, oh, would have, could have, should have.
Romer does, however, fault the Food and Drug Administration.
The FDA application was 28 pages' long.
Miles O'Brien's recent "Frontline" documentary described the challenges faced by a University of Washington researcher in the early days of the pandemic, when he raced to get a new test approved.
One of the things is, they needed a document FedExed across the country before they could look at the document.
You couldn't electronically transmit it?
I could electronically transmit it, but they couldn't look at it until it was FedExed.
The FDA told me it did review Greninger's application, but it was incomplete. They also said they were balancing the need for tests with concerns about accuracy.
I understand why they have to be very careful. But they're making people who are innovating, finding better ways to do the tests, jump through these extraordinary hoops. And it's taking months to just get simple things done.
Case in point, says Romer, the saliva test approved last week.
You just spit in a tube, much better than those swabs.
I'm sorry, but I have to get in there, OK?
But it took almost a month for the FDA to say, OK, well, somebody can spit in the tube without being physically present in front of a health care professional who watches them while they do it.
I mean, if it takes a month to make a decision like that, we're never going to get to the faster, cheaper, better tests that we need.
What about people who've gotten the blood test that shows that they have antibodies, so they must have had the virus? Are they then OK just go back into the world?
So you can't restart an economy with just the 5 percent who've got antibodies.
You have got to let the virus run through the community and get to 60, 70 percent with antibodies. But it's a horrific path to get there, because a million people are going to die along the way. And it'll take a year for that kind of process to work through the whole economy.
What's your biggest fear right now, economically?
The biggest risk we face is that the economic turmoil is going to lead to political turmoil.
We can rebuild. We can recover income. But if we damage our institutions of rule of law, democracy, basic freedoms, that can take a lot longer to rebuild.
Are we moving towards the kind of investment you think we have to make?
I am actually very confident that it's going to happen, because there are no good alternatives. We're losing $500 billion a month.
It's eventually going to dawn on people that we can't afford to keep doing that. And compared to that, $100 billion a year is really pretty cheap.
In fact, Romer is sure enough that testing will soon be everywhere, he offered to put his money where his heart is, $500 of it.
I'm so confident that testing will be the way out of this crisis that I will bet you that, in six months, we will be doing 20 million tests a day in the United States.
So, I'm betting against you now that we're not going to hit 20 million a day, tests, in six months?
And I pay your charity if you win, and you pay my charity?
That's a deal.
I will take that bet.
OK. Have me back, and we will see how it goes.
For the "PBS NewsHour," the ever-skeptical Paul Solman, now with some skin in the game.
Watch the Full Episode
Paul Solman has been a business, economics and occasional art correspondent for the PBS NewsHour since 1985.
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