Coronavirus and the Economy:
A Q&A With Michael Morris, Professor of Professional Practice, Department of Economics, Oklahoma State University
To me, one of the most notable aspects of social distancing during COVID-19 has been the way people are rallying to support local business. And honestly, it’s kind of nice to know that, when I feel tired at the end of the work day or simply don’t want to make another meal out of canned beans and vegetables, I can order curbside pick-up. Not just as a luxury, but as a vital way of supporting the local economy.
Shop Local Resources
Of course, it’s most always better to #shoplocal, to buy books from your favorite indie bookstore rather than Amazon, to purchase gifts and clothes at a neighborhood boutique rather than Target. But the strain felt by small business is extra-tangible right now. If you haven’t already, consider joining the Stand Up to COVID 19 – Support Local Tulsa Business Facebook Group. This group has more than 30,000 members. People are using it to find everything from curbside birthday cakes to last-minute family dinners to appliance repair.
You can also check out tulsago.com, a directory of open businesses and what they have to offer. For example, we ordered dinner from Roka a few weeks ago. Not only was it delicious, if you mentioned their listing on the website, you received 15% off your order. Plus, they are giving 50% off a bottle of wine or beer with the purchase of an entree. Fantastic!
Q&A with Economics Professor Michael Morris
Professor Michael Morris, OSU
Despite that positivity, there’s no question that “the economy is definitely taking a hit,” in the words of Michael Morris, Professor of Professional Practice in the Department of Economics at OSU. I emailed Professor Morris a few questions about COVID-19 and its impact on the economy, which he was kind enough to answer. Especially since at least one of my questions reveals that I don’t know anything about some of this!
Q: What would you say to people who are worried about how the Safer at Home order is effecting our economy?
MM: The economy is definitely taking a hit due to the coronavirus, and the safer at home measures are a factor. However, there will a time when these measures start to be relaxed – so just try and be patient.
Q: I’ve noticed a tension between the desire to protect people’s health and to protect the economy, with some people saying that the benefits of social distancing don’t outweigh the threat to the economy. How would you respond to this?
MM: It is easy to get caught in that type of a zero-sum game debate where you see the rising numbers filing for unemployment and falling production measures and blame it on the social distancing. But the truth is that much of that economic pain would happen anyway, even without social distancing measures.
You can see this in a country like Sweden, which has more lax social distance guidelines (no groups over 50 people, encourage those who can to work from home, maintain at least 3 foot distance but no full lockdown). Sweden is expecting an annual decline in GDP on par with other countries, and their economics predict a contraction at least as big as the U.S. will have. Many businesses are seeing only a third of their typical revenues. That is still more than none, but for most small businesses in the U.S., they would quickly have to start letting people go then. Part of the reason Sweden has been able to stay with this policy is that they have not seen a huge escalation in cases. If they do, you would see more strict measures, I think.
There is also research that suggests that strict measures can actually help an economy recover more easily. There is a paper from economics at MIT and the Federal Reserve that looked at different cities during and after the 1918 flu pandemic. They found that cities that implemented stricter measures more early on not only saved lives, but also fared better on measures of economic recovery after the pandemic.
One more thing for Oklahoma particularly, is that the drastic decline in oil prices is going to hurt our economy regardless of any other social distancing measures.
Q: Some people are advocating for a quick end to the Safer at Home order so that nonessential businesses can open sooner rather than later. Do you think this is a good idea? What kind of reopening schedule do you think would be best for both health and the economy?
MM: I hear the debate about a “quick” opening or not, but I think there is really more consensus here than it may seem. Most wanting a quick opening just want to start relaxing some restrictions soon, but you don’t hear many real calls to just drop all measures completely right now. The idea of doing it in phases – along with adequate testing and tracing – makes sense. I really have no idea what exactly should indicate the time to start, but certainly a steady decline in new cases over a period would be wanted along with making sure you have healthcare capacity available. Really the things being discussed now.
As beneficial as opening up may be for the economy it will inevitably be slow because people will be cautious; and if there was an escalation of cases after all the work done so far, then it could force the recovery to be drawn out even more.
Q: What might the economic impacts be of NOT implementing a Safer at Home order?
MM: If you did not implement any social distancing and infection rates grew rapidly, then people would hunker down to a large degree anyway; so many businesses would see a large drop regardless.
Many other places such as Italy, Spain and really New York waited on imposing strict measures until it was essentially too late and the cases became overwhelming. Once the medical system starts to get overwhelmed, you see government inevitably turn to lock-downs and strict social distancing anyway, but now you have even greater problems.
Furthermore, you would lose many more lives. One study from the University of Chicago estimated that doing nothing would cost $8 trillion in terms of lost lives using valuation methodology typical for lawsuits and other court settlements.
Social distancing measures are most effective it you do them early and strictly. What that looks like depends. If you have the capacity for broad, rapid testing and tracing, then you can be very strict on those who have it or have been around others who have. Without that capacity, you have to implement the broad measures we are seeing now in the U.S.
Q: Historically, what kind of economic situations have been similar to this? What are some actions that helped the economy recover?
MM: There has never really been any truly comparable economic situation to consider. Prior global pandemics in the 20th century involved the flu. We currently do not have enough broad testing data to determine just how deadly the coronavirus is, but even the most conservative measure shows it multiple times more deadly.
I mentioned above an economic study of the 1918 flu pandemic that concluded that cities that undertook earlier and more strict social distancing measures not only saved lives but recovered at least as rapidly if not more so.
The other thing that is truly unique about this situation is the role of the government in not only implementing broad shut-down measures, but also in trying to support the economy. There really has been no precedent for the speed and size of government support being undertaken right now. The entire endeavor is like putting patient in an induced coma; that is what we are doing. Despite this, I think more support is likely to be needed to really help the states recover well, but the U.S. after a strong decade is poised to be able to help more if there is the political will.
Q: What are some things people can do right now to support the local economy?
MM: If you are still able to work and getting paid, then spend that money supporting those who are struggling. You can order takeout, but think about going further. Maybe you don’t stop your gym membership payments. Think about paying for your haircut even though you are not getting one. Think of ways you help provide income to someone.
Q: What financial help is available to individuals and small businesses right now, and what are some things people should know before applying for a stimulus check/loan? [Note: I was mistaken in thinking you had to apply for a stimulus check, based on a conversation I’d had at home. So don’t be mislead by my confusing question!]
MM: You don’t apply for the individual stimulus checks, they will just come if you qualify and are arriving now. As for the small business loans, the money for that is currently lent out and we are waiting for more to be approved by congress. The Federal Reserve could actually step in and help provide more funds for loans, and has a program to do so, but the Fed program has been more limited than I would like to see. I think they are more worried about potential losses than they should be at a time like this; they can handle the losses.
As far as what to know: The stimulus loans are for businesses of 500 workers or less (though the Fed program applies to some more medium-sized firm), no more than 25% can be for non-payroll costs, you can borrow up to 2.5 times average monthly payroll for a maximum of $10 million – and the loan will be forgiven if the workforce remains employed for the 8 weeks after receiving the loan. But again, there is currently no more available funds left for these loans.
Q: Do you have any advice for families experiencing economic strain during this time?
MM: If you are facing economic strain, start by identifying your most important expenses such as rent and food. Make sure you can cover those, and then cut everything else that you can. It can be hard, but getting any kind of breathing room will be worth it. Building a budget can seem daunting – but start by looking at your bank accounts (checking, credit cards) over the past month and see what you are spending money on and what you can cut. Then set a goal for how much to spend and start building a way toward that.
I find that the easiest way to stick to a budget is the old cash-in-envelopes method: You label envelopes for different spending categories, you put cash in there, and that is all you can spend. There are plenty of resources online that can help you with the process as well (mint.com, thebalance.com and others).
Q: For people and families feeling economic strain right now, is there any reason to be hopeful? Any silver linings?
MM: There is always reason for hope. In fact, if you are feeling overwhelmed by financial strain, then the first thing you should do is to reach out to someone you can talk to for some emotional support. This is going to pass. The economy has been through booms and busts before and will recover. We are also seeing the federal government being more active in helping than they have typically been in prior downturns
As for silver linings, this has been a time when many families are spending more quality time together, and that can have long-lasting positive impacts.