EDIT: now with citations!
The economy is wrecked no matter what.
We lock down and don't pay anyone: half the country starves (1).
We don't lock down: half the country gets hammered with HUGE medical bills that bankrupt them for life (5).
These are the two extremes and any variation of flattening the curve with releasing all restrictions to have another controlled wave of infection is only cycling between these two; it doesn't SOLVE anything, it just minimizes some of the damage and stretches the rest out from the initial indeterminate period to a longer indeterminate period.
So, we have to be truly honest right up front: there is no escaping economic devastation.
To stem the tide of massive starvation die-offs during the Great Depression the government spent HUGE volumes of cash it did not have. Creating these jobs was more expensive than just giving hand-outs but the psychological effect of working for the earnings rather than receiving charity was deemed more valuable than the extra cost.
The government INVENTED money and generated the work projects to get people out of their starvation trajectory (2).
That's what we have to do here. Will it cause massive inflation? Yup. It will. That's a future-us problem... but there will BE a future us to handle it. (3)
With an up-to 12% serious condition rate (6)(7) we are looking at half the country (4) is saddled under permanent medical care debt then there is no economy for them (5).
They won't be able to afford anything more than the most meager subsistence and that leads to individual economic ruin (8). What drives the economy as a whole? Consumerism (9)(10). With half the populace being able to buy anything due to crippling medical debt there is no consumerism and, therefore, no economy. It crashes. Inflation doesn't matter when all the businesses are going under because no one can buy their crap.
That's the thing about this situation - the rational, zero-sum math is now irrelevant.
So, tax the shit out of the billionaires whose entire fortunes are built on exploiting their workers. Tax them AND deficit spend to keep people alive. It's the least-costly way through this.
For example... let's use the worst-case estimates for deaths (because, if we just stop all measures and open everything for business, as usual, that is plausible)...
The mortality rate is 2-3% barring complications if people actually get the care they need (7). If we take the 2.5% mortality rate and multiply it against the US population (330million) we have a death toll of 6.6M people (11). That's assuming we are able to treat all of those who are sick properly. To do that requires flattening the curve (12), otherwise, the system will be overwhelmed and many more will die (13).
That's up to 6.6M deaths in the first go-round of this pandemic; there is evidence that reinfection can happen(14) and each new generation will have no inherent immunity.
59% of Americans have life insurance of some form(15).
It's estimated that most are under-insured(16) so let's guess REALLY low for the average insurance amount and call it $25k (16).
That means the life insurance industry, alone, will take at LEAST a $29.5B hit due to this pandemic.
Now, let's look at the bills for medical care. Reports of uninsured people getting hit with HUGE bills are popping up. They're in the $20k - $100k range (17). For the sake of minimizing the impact and easy math, let's call this $25k per person.
If 6.6M (2.5%) are DYING that means about 4x (2.5% x 4 = 10%; 10% + 2.4% = 12.5%) that amount are getting ill and recovering. So, for easy math, let's round that down to 33M having a serious illness that requires significant medical interventions.
For easy math let's also assume that the price tag is the same for the insured and uninsured (it's not).
That means that ~$25k * 33M people is the economic impact on the combination of people and the health insurance industry. So that's an additional $83T of economic damage. At an uninsured rate of 11%(18) that's more than $8.3T hitting the poorest people in the country and the rest bankrupting the health insurance industry. I have left out the additional medical cost of the people who died... but they will have incurred expenses, too... so keep in mind that these numbers are incomplete.
This is without even trying to calculate the impact of having massive labor shortages due to people being unable to work (the best-case scenario for those infected who get sick seems to be 2 weeks of intense misery with a two week recovery time; with some as many as 6 weeks of illness).
So let's do that... 33M people getting sick for 5.2 weeks (on average). The year has 52 weeks so 5.2 weeks is the easy math point to make it 1/10th of a year. The workforce in the USA is about 160M (20) and the virus does not discriminate between those who work and those who do not so let's do some more rough math and divide out the proportions. 160M / 330M is 48% of the population. 33M people is 20% of the workforce but only 10% of the overall population so lets do some more easy math and call the workforce half the population so we can cleanly halve the 33M to determine the economic impact of those people being out of work. So, 16.5M people afflicted out of 160M - roughly 10%.
10% of the workforce for 10% of the year is 1% of the overall output of the workforce as a whole.
On top of the previously stated economic damage due to the illness, we are looking at a 1% retraction of the GDP as a result of the illness. That's roughly $205B in economic damage. (21)
Now let's look at the huge cost of the funeral industry. This, like medical costs, is a sunk cost. It does not return anything of value to the economy as a whole; all of the products are one-time use and are, literally, buried or burnt up. No reclaiming value. Only the wages of those working in the funeral industry help drive the velocity of money, the rest is all a literal drain on the overall movement of cash. 6.6M ADDITIONAL deaths. Let's just go with the rock-bottom $1k per body (22) cost of processing each body (as an average) and ignore that the rich will spend WAY more and the middle class often spends 10x that amount. That's ANOTHER $6.6B hitting the economy... and that assumes that we have the mortician throughput to handle the deaths... which we don't.
So, let's round back on our options:
1. Lockdown and presume everyone has to fend for themselves on their savings. We incur massive starvations and deaths and economic collapse. With 50% (1) of people living in a situation where missing two paychecks means utter and complete disaster, this WILL be a problem. Let's say only half of those people die. That's 82M left in serious trouble and $207T of economic damage due to life insurance payouts and processing costs. It also means a reduction in the overall GDP of at least 25% as a quarter of the people stop consuming, which is another $50T.
2. We do NOTHING and let everyone get sick as fast as possible. This is the basis for all of the above. 6.6M dead, 4x that many needing medical care. A hospital system that cannot accommodate them all, leading to more deaths.
3. We flatten the curve through incremental openings and closings. This leads to all of the above as well, but over a 2-3 year period instead of in a single year. It does manage to reduce the peripheral deaths and the deaths of people due to being unable to get the necessary care so that ONLY the predictions above are valid.
OR
4. We suck it up and pay people to stay home, taking the economic hit to subsidize the lockdown, thus reducing, but not eliminating, the GDP hit AND the medical and insurance devastation and the vast funeral industry boom... at a cost of $5.7T (23) direct cash outflow (that goes directly into the velocity of money so it keeps the economy humming where it is working).
Super short options version:
1. $257T of economic damage, 25% population loss, economic ruin for everyone who lives.
2. Worse than option one in every way.
3. Same as option 1 but spread out in time instead of all at once.
4. $5.7T in direct damage and an indeterminate level on indirect damage that is less than $207T, population loss at 12% or less.
Lots of people think the rational choice is to open up and let the economy go but it is NOT. Will debt-financing the general support of everyone crippled us for a couple generations? Probably. But it is still less damaging than the alternatives... it, literally, costs less and saves lives.
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1. The number is uncertain as it is not a trackable metric due to a variety of factors but 50% of families being unable to cope with two lost paychecks is a reasonable, LOW-BALL, guess based on the evidence. https://www.marketwatch.com/story/a-shocking-number-of-americans-are-living-paycheck-to-paycheck-2020-01-07
https://www.forbes.com/sites/zackfriedman/2019/01/11/live-paycheck-to-paycheck-government-shutdown/#5cb260194f10
2. Multiple stages of economic intervention were implemented in an effort to prevent the total collapse of everything during the Great Depression. https://en.wikipedia.org/wiki/Federal_Emergency_Relief_Administration
3. General wisdom, and all evidence, indicates that established monetary theory rules the value of cash that is not backed by anything tangible. Our cash is not backed by anything tangible so creating new cash to face this crisis WILL deflate the value of the existing cash - https://en.wikipedia.org/wiki/Monetary_policy
4. This is speculative. Medical debts don't vanish when someone dies, they pass into the estate. So, based on the disease rate, we have 12% of the population incurring MASSIVE debts, which spills over to affect their family and generate pockets of collective financial ruin. If each medical debtor has 3 others (typical family of 4) they drag down with them that is 4*12 = 48% of the population that is financially destroyed.
5. Medical bankruptcy is a very real, very American problem - https://www.theguardian.com/us-news/2019/nov/14/health-insurance-medical-bankruptcy-debt
6. Up to 88% of people may be carriers without having symptoms.
https://www.wsj.com/articles/new-data-suggest-the-coronavirus-isnt-as-deadly-as-we-thought-11587155298 https://www.advisory.com/daily-briefing/2020/03/02/asymptomatic-coronavirus https://www.i24news.tv/en/news/coronavirus/1586872199-study-over-80-of-pregnant-women-with-covid-19-in-nyc-asymptomatic
7. https://www.cdc.gov/mmwr/volumes/69/wr/mm6915e3.htm
8. Really? You need a citation for this? Google it. There are volumes and volumes and volumes on how too much debt and bad cash flow can utterly destroy an entity. But, if you need a citation - I cite myself as someone who has a Management degree and an MBA and who has climbed back from the pit of bankruptcy through careful application of sound policies.
9. Just one example. There are so, so many examples of this. That we measure out economic health using GDP is, itself, an indicator. https://www.wsj.com/articles/u-s-consumer-spending-rose-sharply-in-july-11567168319
10. The fundamental concept for economic growth based on money moving around is, appropriately, called "the velocity of money." This is the concept that has been usurped by "trickle-down economics" and implemented incorrectly so as to make many doubt its truth. But it is real. The economy is NOT money, it is the MOVEMENT of money. https://www.investopedia.com/terms/v/velocity.asp
11. Flattening the curve: https://www.livescience.com/coronavirus-flatten-the-curve.html
12. Here is an estimate that is much more optimistic than my rough math; it predicts only 2.2M deaths.
13. I cannot find a good source to outline how much worse it will be if we don't do anything.
14. Reinfection is real. https://time.com/5810454/coronavirus-immunity-reinfection/
15. Life insurance market penetration https://www.insure.com/life-insurance/life-insurance-underinsured.html
16. Average life insurance amounts - https://www.accuquote.com/other/interesting-life-insurance-statistics/ - note, they say the average is $125k, which multiplies my figure by 5.
17. Covid medical bills: https://www.nbcnews.com/health/health-care/got-coronavirus-you-may-get-surprise-medical-bill-too-n1187966 https://thehill.com/opinion/finance/490168-the-threat-of-coronavirus-medical-bankruptcy - I have seen more but cannot currently find them.
18. Uninsured rate - sources vary. https://en.wikipedia.org/wiki/Health_insurance_coverage_in_the_United_States
19. Corona virus recovery time: https://www.webmd.com/lung/covid-recovery-overview#1
20. Us workforce - https://www.bls.gov/opub/mlr/2015/article/labor-force-projections-to-2024.htm
21. US GDP https://www.google.com/search?q=us+gdp
22. Minimal death costs - https://personalfinance.costhelper.com/embalming.html
23. $2k / month for everyone in the workforce for 18 months - hopefully we can have an effective vaccine developed by then
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