The Lasting Consequences of Lockdowns
The Lasting Consequences of Lockdowns by Ethan Yang for American Institute for Economic Research
There has been much discussion over the immediate effects of public health interventions such as business closures and restrictions on social activity in response to Covid-19. It is clear that lockdowns have led to a number of adverse consequences such as unprecedented economic retraction, psychological stress, suicides, and disruptions to all sorts of important social institutions. These factors alone, combined with the questionable efficacy of lockdown policies in preventing Covid-19 deaths, should encourage consideration for the contrary. However, what has seen sparse attention is the long-term consequences that come with drastic lockdown policies.
Lockdowns do not happen in a vacuum, history keeps moving even after Covid-19 is gone and the actions we take today will set the foundation for tomorrow. For example, if we forcefully redistributed all the wealth in society we could easily eradicate poverty and inequality. However, in the long term that would likely lead to severe economic retraction and require that the United States government become a dictatorship. That society is not worth living in and we would be better off if we hadn’t done so. Setting aside the general debate around the short-term efficacy of lockdowns, it seems that the long-term consequences of lockdowns only promise more hardship. Planning not just for next year, but for the generations decades ahead that will inherit this country once our time here is done is one of the true indicators of responsible leadership.
Accelerated Economic Calamity
It is abundantly clear that lockdown policies such as nonessential business closures and movement restrictions have ravaged the economy in the short term. It is also clear that in the near future the security of small businesses remains uncertain as Yelp reports that 60% of restaurants will never reopen. Such developments are certainly painful but perhaps one of the most important and least discussed issues is the potential economic crisis that may result years into the future. A crisis that will not just affect small businesses and vulnerable families but the entire country.
Closing down the country has forced the US government to implement trillions of dollars worth of quantitative easing to prop up Wall Street and stimulus checks to prop up Main Street. If lockdowns continue such policies will need to continue. The result is an unprecedented level of government debt. Forbes writes,
“For the first time U.S. debt is now about equal to GDP (Gross Domestic Product), like the sound barrier we once thought if we hit it we might explode.”
Although the US government can afford to go further into debt it would now be crossing into a fiscal and monetary unknown. How much longer can the government print money to finance its programs and will this lead to a point where future Americans will need to take painful if not devastating austerity measures?
The Federal Reserve has indicated that it intends to keep interest rates low until 2023, which may not only encourage rash investing decisions on Wall Street but for the average American Market Insider writes
“The Fed’s somewhat vague language is of little comfort to Americans working to build up their savings. In the months since the Fed slashed rates, the yields on checking accounts and savings vehicles have cratered. And for the foreseeable future, Americans will need to make some tough calls to ensure their money is working for them.”
Even after the Covid-19 vaccines roll out, herd immunity is reached, and the virus is long gone, the drastic policies of today will last long into the future. The worst-case scenario is that the current policies hasten the timeline for a financial crisis or worse.
Forbes poses a potential consequence of our current economic policies when it writes
“But we are on a collision course with another force, as we see further increasing Main Street insolvencies, unemployment and the weakening of the finances of ordinary households and businesses. If the Fed were to ease up “printing money,” we might see significant deflation, like Japan in the 1990s. Worst still, we might see rapidly increasing inflation. This would produce the secular stagflation former Treasury Secretary Larry Summers has spoken of—remember President Jimmy Carter?”
Although nobody is sure to what extent the government can continue printing money without severe consequence, and it is entirely possible that it could go for much longer, we are testing the boundaries of monetary policy.