According to our calculations, less than 8 percent of the trillions of funding Congress has allocated so far in response to the virus was for solutions that would shorten or reduce the virus itself: measures such as increasing the supply of personal protective equipment, the expanding testing, developing treatments, seeking contact or developing a vaccine. An example of this is the most recent House Covid-19 package. It requires $ 3 trillion in expenses; less than 3 percent of that total is for Covid testing. Now that Congress is considering the next steps, it is imperative to shift priorities and focus more funding and efforts on actually ending the pandemic.
In the same sense, it is vital that elected officials realize that home commands, social distance, masks and school closures are not the main cause of our economic disruption. Americans cut their economic activity before those orders has come into effect and will limit their activity as long as the threat of capture of Covid-19 persists. No matter how much cheerleading is being done, a phased reopening of the economy will not lead to anything close to full economic activity until we credibly address the pandemic.
MIT economist Ivan Werning has a useful analogy. Imagine we found out that an asteroid would hit Earth in four months. While news of the asteroid would cause financial disasters, no one would think that the solution to the impending doom would be unemployment insurance, small business loans, and other incentives. To fully address a crisis, you need the cause of the crisis, not just the economic consequences.
Many economists have called for more funding to fight the virus directly. Few decision makers in DC have faced the spending needed. In an attempt to do so, a group of leading economists, including Nobel laureate Michael Kremer, has proposed publications a vaccination effort of $ 70 billion dollars. The proposed expenses are much larger than anything proposed by the White House or Congress and also quite cheap compared to the potential benefits.
The same logic suggests that we are investing massively in several other ways to fight the virus in the period before a vaccine arrives.
Some existing proposals ask for extensive testing without much need for contact tracking. This will work if new technology can scale up quickly for cheap and easy testing, which leaves some doubt. Others ask for fewer tests in combination with tracing and isolating ground contacts, which is a proven approach that some also doubt is possible. However, others fear that all of this will not work in time, which is why they are calling for the production of huge amounts of masks and personal protective equipment to allow everyday life to resume in relative safety. Many also point out that developing effective treatments would reduce fear of infection, leading to renewed economic activity.
In the face of competing proposals, our suggestion is to do them all. The pandemic is destroying the nation, but no one really knows what works best, or doesn’t work at all, or within what time frame. Our relative passivity seems to be based on the idea that we will get an effective vaccine in 12 months. What if it takes three years?
Nobel laureate Paul Romer and the Rockefeller Foundation each have outlined plans of $ 100 billion to improve testing. We say let’s finance both, allocate half of the money directly to states, who can spend activating the huge capacity of university labs, and also fund Romer’s plan to scale up $ 10 instant tests for real mass tests. We could create a $ 50 billion challenge prize that would reward the first 10 companies to develop effective treatments for Covid-19 – $ 5 billion each. We could fund Scott Gottlieb and Andy Slavitt’s bipartisan $ 50 billion proposal for contact tracking. We could allocate $ 100 billion to fund the libertarian tendencies The Mercatus Center proposal for advanced purchase contracts to obtain massive amounts of PPE.