By Diane Swonk, chief economist, Grant Thornton
COVID does not care who won the election or who will control the Senate, but it will be the single largest determinant of where the economy goes next. COVID cases, positivity rates and hospitalizations are all surging again, a fact lost in the turmoil surrounding the election. The current jump in infections is worse than the surge we saw in the Sunbelt during the summer.
The current surge is national as well as global in scope and is occurring before temperatures plummet across the country, which could exacerbate the spread of the disease. The pace of infections in the U.S. is now growing at an exponential rate and is starting to overtake that of the U.K., which has already initiated another round of lockdowns. (See Chart 1.)
Conditions could get markedly worse before they get better. Epidemiologists are predicting that infections will peak in late January, about the same time the next president will be sworn into office.
We are assuming president-elect Joe Biden will be sworn into office on January 20, despite challenges to the election results. The president-elect has already announced a new COVID task force to rein in the spread of the disease and better coordinate the country’s response. It is unclear what he can accomplish before he is sworn in and even then, the challenges will be substantial. Skepticism over the basic need to wear a mask to contain the spread of an airborne disease is high, while trust in the safety of a vaccine is low.
Most don’t expect a vaccine to be widely available until well into 2021 and not all vaccines in clinical trials will be as effective. Pfizer has promised up to 50 million doses by year-end and over 1.5 billion next year globally, but two doses are required for immunity. That is still a small fraction of the world’s population and we still don’t know how long it will last. The jury is still out on whether the vaccine is as effective against the most mild and severe cases.
The vaccine requires a complex and well coordinated supply chain to retain its efficacy; it has to be kept at 94 degrees below zero. Pfizer plans to start shipping to hospitals and clinics that can accommodate the need for cold storage after it receives emergency authorization by the Food and Drug Administration in December. Hospitals overwhelmed by COVID patients in the interim could inadvertently slow the distribution of a vaccine. We simply may not have enough health care workers to care for patients and administer a vaccine.
Why can’t we just isolate older people to avoid the worst outcomes and open the economy more fully? Because death is only the most dire consequence of contracting COVID. The disease triggers a whole host of long-term health problems for patients of all ages, including those with only mild symptoms. These span damage to major organs, blood clotting, fatigue and neurological problems. This is at the same time that the paid sick leave provided by the CARES Act has lapsed.
Hospitalization rates are high, which is overwhelming hospitals and undermining their ability to stay financially afloat. COVID is not a profit center; it is costly to treat and will accelerate consolidation in the health care sector. That will further curb access to quality health care and a vaccine, especially in rural areas where hospitals are few and far between.
The timing of the surge in cases couldn’t be worse, given the lapse in aid tied to the CARES Act. Families who once were able to cover the basics of food and shelter are now running on fumes. The ranks of those who are slipping below the poverty line have soared. Layoffs once seen as temporary are now permanent. The number of people laid off for 27 weeks or longer jumped by more than one million in October.