Maurice Kugler
Reconciling the need to flatten the COVID-19 curve through social distancing and the need to get the U.S. economy up off its back is a difficult equation without a definitive answer, a George Mason University professor said.
But if New York state is now testing at a higher per capita rate than South Korea or China, as media have reported, “I would be delighted,” Maurice Kugler said, “because that is exactly what we need to be able to get the economy back going.”
Kugler, an economist and a professor of public policy in Mason’s Schar School of Policy and Government, made those comments during an interview for the “From the Capital” program with the Middle East Broadcasting Networks.
Kugler called “controversial” recent calls from President Trump to reopen the economy and his musing that the cure for the pandemic—business shutdowns and social distancing—should not be worse than the pandemic itself.
“So how do you measure the value of a human life versus a given amount of GDP loss, or the social loss in terms of the lack of interaction between people?” Kugler said. “It’s very hard to do. However, something which I think is important to remember is that social distancing for more than two or three weeks could destroy a lot of knowledge capital in the economy. It’s not just the fact that firms have to shut down, you lose a lot of knowledge of entrepreneurs who have established businesses, which have been successful, which have been generating innovation, new goods, new services, new products and prosperity for people. That could be a big problem.”
Kugler said his preference would be to limit social distancing for two to three weeks while finding a strategy based on massive testing. That said, he added, “You cannot relax the constraints on social distancing unless you have the kind of testing effort that lets you identify the pockets of potential contamination … and really finding where the people who are at high risk are and helping them isolate themselves.”
But what if massive testing is not an option?
“It’s a huge dilemma,” Kugler said, “because the number of people who can die goes into the hundreds of thousands in the case of the U.S., and then how do you deal with that human tragedy?”
That is where fiscal stimulus comes into play, he said.
“If we need to expand social distancing, we can actually mitigate the adverse costs through programs to stimulate businesses to allow them to continue to paying payroll, to give them the opportunity to pay their debts,” Kugler said. “That will avoid the problem of the destruction of knowledge capital, which is a big driver of economic activity and innovation.”
“Fiscal stimulus should be an instrument that is used to deal with this crisis in a way that helps people who are really in distress,” he said, “and not as a handout for people who don’t really need it.”
Maurice Kugler can be reached at mkugler@gmu.edu or 703-993-3804.
For more information, contact Damian Cristodero at dcristod@gmu.edu or 703-993-9118.
About George Mason
George Mason University is Virginia’s largest public research university. Located near Washington, D.C., Mason enrolls 38,000 students from 130 countries and all 50 states. Mason has grown rapidly over the past half-century and is recognized for its innovation and entrepreneurship, remarkable diversity and commitment to accessibility.