July 31, 2020

WALL STREET JOURNAL: The Lockdown’s Destruction: Incredibly, some in the media want to repeat the second quarter’s 32.9% plunge in GDP.

Consumer spending fell 34.6% and accounted for some 25 percentage points of the GDP decline. The fall in transportation, recreation, food services and hotels was brutal. But the biggest surprise was the plunge in health-care spending during a health-care crisis. Health care represents about 12% of the U.S. economy and its collapse subtracted 9.5 percentage points from GDP.

How does that happen in a pandemic? The answer, as our friend Don Luskin points out, is that politicians panicked in March and waited for a surge of Covid-19 patients that the pandemic modelers told them would arrive. Blessedly, the modelers were wrong, and far fewer hospital and intensive-care beds were needed. But the economic harm from stopping all elective surgeries and barring visits to doctors was severe and unnecessary.

It was also a terrible public-health blunder. That harm will play out for years as Americans discover cancer, heart-disease and other diagnoses that were missed or delayed. . . .

Hard to believe, but some on the left are stumping for a second nationwide lockdown to control the virus. Shut the U.S. down again until October when the scourge will be gone for good. Do they want another 33% decline in GDP and 40 million more unemployed?

Without a vaccine, the virus was always likely to spread through most of the country, as the Centers for Disease Control and Prevention predicted in March. The lockdown-as-miracle-cure is a fantasy, as the World Health Organization has now acknowledged. The economic and public-health harm is too great and the virus is too easily transmissible.

The public is smarter than the media and can adjust its behavior when flare-ups occur. Hospitalizations and cases in hot spots in the South and West are trending down. They’ve fallen by a third in Arizona from a peak two weeks ago and are down 8% in Texas. Deaths have increased, but the rate is far below those on the East Coast in the spring.

At least the worst economic news is over, or it should be without a second lockdown. Orders for motor vehicles and capital goods are rising, and housing is strong. The service economy will take longer to come back, but it will do so when the public feels confident enough to venture out. What no one needs is another catastrophe like the second-quarter lockdown.

The WSJ is on-target, though the GDP drop is not an absolute 32.9% but an annualized rate. The actual drop for the quarter was much smaller, of course, though still huge. And it was pretty much all government-induced. Weirdly, when you force large parts of the economy to close down, the GDP drops.

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