Larry Summers (Photo: Business Insider)

By Al Edwards

The economic impact of COVID-19 on the American economy will be astronomical and may take it, at the very least, a decade to recover.

“The total cost is estimated at more than US$16 trillion or approximately 90 per cent of the annual GDP of the U.S., “ wrote former U.S. Treasury Secretary Larry Summers and Harvard economist David Cutler in a report published in the Journal of the American Medical Association.

The report concludes that total deaths from the coronavirus in the world’s largest economy will be around 625,000 with reduced economic output costing the country US$7.6 trillion over the next 10 years.

The impact will be felt most acutely with the loss of GDP and health impairments.

Summers has served as a top economic advisor to President Barack Obama as well as former President Emeritus of Harvard University and Chief Economist at the World Bank.

While President Donald Trump downplays the coronavirus and vows to preside over a resurgence of the U.S. economy, Summers sees a bleaker picture and a protracted recovery. He is of the view that the coronavirus is the greatest threat to prosperity and well-being the U.S. has encountered since the Great Depression.

“Output losses of this magnitude are immense. The lost output in the Great Recession was only one-quarter as large. The economic loss is more than twice the total monetary outlay for all the wars the U.S. has fought since September 11, 2001, including those in Afghanistan, Iraq and Syria,” read the report.

Families across America are bearing the brunt of the economic fallout from COVID-19 with many citing loss of employment and reduced income. The Summers/Cutler report estimates that a family of four will lose around US$200,000 due to the virus.

“The immense financial loss from COVID-19 suggests a fundamental rethinking of government’s role in pandemic preparation.”

Summers/Cutler Report

There are those who say testing has been inadequate and this report calculates that putting effective measures in place would cost US$100 billion. This should see some 233,000 Americans tested each day, which would entail contact tracing of 30 million people a week for all of the year 2021.

The report stated that testing measures should remain in place and that a greater effort must be made in seeing to it that the country is well prepared and has effective policies to combat  future pandemics.

“The immense financial loss from COVID-19 suggests a fundamental rethinking of government’s role in pandemic preparation. As the nation struggles to recover from COVID-19, investments that are being made in testing, contact tracing and isolation should be established permanently and not dismantled when the concerns about COVID-19 begin to recede,” stated the report as it looked at what should transpire in the U.S. post coronavirus.

Summers does not believe the U.S. dollar will flame out . (Photo: Insider)

One of the great fears is that the U.S. dollar will lose its status as the world’s premier currency. Summers does not believe the U.S. dollar will flame out and will be driven to relinquish its reserve status.

The way he sees it, a greater effort must be made to help families and small businesses with less of a preoccupation on rescuing big corporations.

“The fact that we’ve got an interest rate that’s essentially zero is telling us that funds are available and they’re not going to crowd out anything important – instead they’re going to push the economy forward.

“All of the dangers are on the side of spending too little right now, rather than spending too much,” said Summers.