Get Ready for a Two-Year Economic Slump

America’s leaders face a difficult question in deciding the scale of intervention needed to prop up the economy: How long will severe restrictions be required in the battle against the coronavirus? Judging from events so far, I’d say they should base their relief efforts on the expectation that the economic slump will last through 2020 and much of 2021.

COVID-19 places a heavy burden on the health-care system because it tends to put a lot of people into the hospital (especially, but not only, among the elderly). Even if only a small fraction of the population is infected, their need for treatment overruns the available resources. To keep hospitals functioning, governments must drastically reduce the spread with some combination of two tactics. One is social distancing. The other is mass testing, tracing, and quarantining. Note that testing is not enough on its own — authorities must also track down infected people’s contacts and quarantine them, to stop the further spread of the virus.