Economists fear slow pace of testing will prolong recession

Epidemiologists are warning that unless the federal government overhauls its pandemic response to ensure a national system for testing, the U.S. could find itself in a vicious cycle of sporadic lockdowns until scientists find a treatment or vaccine for the coronavirus.

A scenario like that would lessen the chances of a quick, V-shaped economic rebound that analysts are hoping for and instead prolong the recession and subsequent recovery, damaging household finances for years to come.

“The economic damage associated with the outbreak is nonlinear,” S&P Global said in a report this week. “That means, for example, that if containment takes twice as long as expected, the economic damage will be more than twice as bad, and, therefore, recovery could take longer and be weaker (with more lost output) than projected.”

More than 75 percent of Americans are under some sort of stay-at-home order in an attempt to mitigate the spread of the virus and to alleviate pressure on hospitals strained by coronavirus patients.

President Trump warned that the country is heading into a “painful” two-week period that will constitute the peak of the virus, and government models are forecasting June 1 as the date for lifting restrictions on the economy. But the light at the end of the tunnel is likely to be further off than either of those events.

Without a new public health strategy in place, experts argue, reopening the economy would likely lead to new outbreaks.

“I don’t think we can decide when to liberate social distancing policy until we have a better handle on who has it,” said Dr. Ashwin Vasan, an assistant professor of public health at Columbia University.

“Once we get on the other side of this hospitalization curve, then we have to go back to public health, contact tracing, isolation of cases, more widespread testing — basically everything we should have been doing six weeks ago,” said Vasan, who served as a health policy adviser to former Democratic presidential candidate Pete Buttigieg.

“Otherwise there will be this ebb and flow of outbreaks, social distancing, outbreaks, social distancing,” he added.

The slow pace of testing has led to frustrations with the Trump administration.

On Monday, Maryland Gov. Larry Hogan (R) told NPR that despite assurances from Trump, testing remained far behind where it should be.

“I mean, I know that they’ve taken some steps to create new tests, but they’re not actually produced and distributed out to the states,” he said.

The U.S. has performed 1.2 million tests since the crisis began, according to the COVID Tracking Project, though there’s been a significant uptick in recent days.

A group of experts at the conservative American Enterprise Institute (AEI), led by Trump’s former Food and Drug Administration chief Scott Gottlieb, released a well-received road map Sunday outlining what the country needs to do in order to end physical distancing measures.

The thrust of the plan is to move toward what public health experts call “surveillance,” a model that’s been used to great effect in Germany, Singapore and South Korea.

In a surveillance strategy, the government gathers information on who has the virus and who they might have exposed in order to allow for targeted quarantining and isolation. That lets the rest of the country open back up.

But the government faces a herculean task to get to that point, according to the AEI roadmap, and testing is just one part of it.

First, it would have to get the point where upward of 750,000 tests are available each week. In addition, Gottlieb wrote, the government would need to build a system to monitor confirmed cases and their contacts, coordinate data from state and local authorities and keep tabs on who has developed immunity. Without all those steps in place, Gottlieb argued, the government will have to stick to physical distancing measures.

“Surveillance coupled with contact tracing and isolation, that’s how we do this,” said Aaron Carroll, a professor at the Indiana University School of Medicine.

But Carroll worries that the government isn’t laser-focused on laying the groundwork for that second phase.

“At no level am I seeing anyone focusing on the long game of where we need to be. Everyone’s just picking dates out of the air,” he said. “We’re focused on the fire that’s occurring right now, which we need to be doing, but we also have to focus on building this massive infrastructure.”

The danger for the economy is that a subpar system of tracking the virus could lead to new outbreaks, requiring some cities and states to return to lockdown mode.

Anthony Fauci, an epidemiologist and member of the White House coronavirus task force, said he would not be surprised if there’s a resurgence in cases this fall.

“I would anticipate that that would actually happen because of the degree of transmissibility,” he said this week, though he expressed optimism that the country would be better prepared.

“Our ability to go out and be able to test, identify, isolate, and contact trace, will be orders of magnitude better than what it was just a couple months ago,” he said.

Paired with resurgent outbreaks, lower consumer confidence and investment jitters, a recovery is likely to be drawn out unless either a vaccine is widely available or effective treatments are identified. Instead of a V-shaped recovery, the shape may resemble something more like a U or even an L.

Nigel Green, CEO and founder of deVere Group, said China’s moves to reopen its economy will offer clues as to what happens economically.

“Investors around the world will now be looking at how China gets back on its feet economically,” he said.

“Did the extreme lockdown work? Were the public health facilities adequate? Will there be another outbreak as activity resumes? How will the authorities now kick-start the economy? How will these decisions, and the success of them, impact the rest of the world?” he added.

Green is optimistic, however, that the world economy could be up and running by October.

“But only if mass testing is rolled out now and governments guarantee to support demand,” he added.