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Penn Budget Model forecasts economic, societal effects of reopening states early

According to the Penn Wharton Budget Model, reopening states early could cause up to 233,000 extra deaths by June 30, but also save 18 million jobs. Yahoo Finance’s Kristin Myers joins Zack Guzman to discuss.

Video Transcript

ZACK GUZMAN: Meantime, we've been tracking the way that governments-- state governments around the country have been weighing opening up their economy after imposing lockdown orders across the country. And of course, there is a bit of a trade-off. In terms of how long those lockdowns will last, we know that they weigh on jobs here, as we continue to watch unemployment claims skyrocket here over the last six weeks-- more than 30 million Americans now applying for unemployment.

And a new study out from the University of Minnesota in their Center for Infectious Disease Research and Policy Center there was looking into the way that this virus might linger until 2022, and perhaps beyond, simply by the fact that people walk around transmitting this without any symptoms. And it's hard, of course, to really figure out who these carriers are because of that.

And all of that is to say it makes it a lot harder and a lot more complicated to say, when is the right time to reopen businesses and the economy in these states? Of course, we've seen a few already moved in that front, with Texas joining their ranks today by opening economies across the state there.

But for more on this and the trade-off between what that could mean on the health front, and increasing deaths already caused by coronavirus, and what it could mean on the jobs front to prevent more Americans from losing their jobs, I want to get to Kristin Myers, who has the details of a new model projecting both of those for us out of the University of Pennsylvania. Kristin?

KRISTIN MYERS: Hey, Zack. Yeah, so the Penn Wharton Budget Model decided to do predictive modeling on the states and figuring out the impact to GDP to job losses, but also to the death toll, if states took one of three routes-- one, not reopening their state at all, which is what we are doing here in New York-- doing a partial reopening, which is what they were doing in Georgia, which we've been discussing over the holidays, and doing just a full complete reopen, like what you're seeing right now in Texas-- which we have also talked about.

So I kind of want to run through what the Penn Wharton Budget Model said was going to happen in each of those scenarios really quickly for you. So the baseline we're going to have here is just not reopening the state at all. So what you're going to see is, by June 30, 117,000 deaths-- just doing nothing, everyone staying indoors, 117,000 deaths.

Now, Zack, I do want to mention here, that's much higher than what the president had previously predicted and said. Remember, we talked about this just a couple days ago. A lot of the models had said that we were looking at around 74,000 deaths by August, but now that number might be much, much higher-- 117,000 deaths.

Now, the GDP decline year over year is going to be 11.6%, so a huge hit to GDP, with roughly 19 million [INAUDIBLE] lost between May 1 and June 30. That's tacking onto the 30 million that we've already seen. Remember, we just got those job loss numbers-- unemployment numbers, I should say-- just the other day at 3.84 million, so we're going to see that number really spike if these states do not open up at all.

Now, if you do a partial reopening, we're going to see 45,000 deaths by June 30. That's in addition to that 117,000 deaths, if we do nothing and we don't reopen the states at all. So roughly that's 162,000 people that would die if we just did a partial reopening. A little bit better here on the GDP decline, of course, is to be expected, if we do a partial reopening of the states, like what Georgia's doing right now.

That's a 10.6% decline on GDP, so you're essentially saving-- if you can even call it that-- one percentage point of GDP decline if we do a partial reopening. The good news here, though, is that you only have 14 million jobs lost between May 1 and June 30. So again, that's 4 million extra people that at least would be able to go back to work.

Now, I want to talk about reopening, because this is where the numbers get really, really stark. That's an extra 233,000 deaths, Zack. That means we are looking at a total of 350,000 people dying by June 30. GDP decline-- only 10.1% year over year, so you're saving about 1 and 1/2 percentage points. And the job losses eliminated would essentially be eliminated.

So there'd be net, no job losses between May 1 and June 30. So that is the trade-off that we're looking at here. And so essentially, what the Penn Wharton Budget Model told me is, look, they're not going to be making the policy decisions. That's for the governors, the president, economists, public health officials to make those decisions.

Is that 1 and 1/2 percentage point on the economy, in terms of GDP loss year over year, worth those extra 233,000 lives? That's the decision that we're going to have to make. And if you look at this modeling, it essentially is putting a statistical value on life. I know many people would say that it's not worth it, but there's a lot of people out there that have been struggling that say, we need to get back to work. We need to figure out some sort of trade-off. So we're going to have [INAUDIBLE] how it goes forward in the states in the next couple of weeks.

ZACK GUZMAN: You saw the armed protests in Michigan too. Clearly, there is a lot of anger on the front of people saying, look, you need to open it up, because I'm struggling here. We've seen a record amount of people applying for unemployment claims. I know this trade-off here. And the model is [INAUDIBLE] when you think about deaths, and GDP, and numbers like that, you would hope that it would inform policy here to make sure, all right, we're thinking about this clearly and moving forward with the right things in mind.

But that is the tough position that a lot of state governments find themselves in now-- Kristin Myers breaking down the latest on that front. Appreciate you bringing that to us.