Economic Perspective: A Permanent Loss in the Economy
“Today’s program looks at a permanent loss in wealth. Mike, even though we are dealing with a second surge of COVID-19, economists seem to be optimistic we will see the economy grow in 2021. Indeed, most economists see the economy reaching its pre-pandemic level of activity late in 2021 or early 2022. Does that mean the cost of the pandemic will have been zero?”
“Of course not, and I think that most people will agree with this. Clearly we’ve had personal losses, deaths, people sick, out of work, et cetera. Overall, we’ve seen the economy struggle in the first half of 2020 and rebound in the second half. But even if we get back to the level of economic activity that we had pre-pandemic, even if we get back there in late 2021 or early 2022, that doesn’t mean there will have been no cost.”
“We will have lost all that growth in the economy and the standard of living that we would have had in 2020 and 2021. So this is a permanent loss that’s been created by the pandemic. Economists think this will be well over a trillion dollars, probably closer to two trillion dollars. So that means our economy has been set back, and those are monies that we’ll never get back because the pandemic created these kinds of permanent losses.”
“The good news is our level of economic activity, our standard of living, will get back to where it was. It just means that when it does get back there it’ll still be short of where it could have been.”
Mike Walden is a William Neal Reynolds Distinguished Professor and Extension Economist in the Department of Agricultural and Resource Economics at North Carolina State University who teaches and writes on personal finance, economic outlook and public policy.