Secretary of Housing and Urban Development Marcia Fudge tweeted last week: “The United States is the only major economy in the world where the economy as a whole is stronger now than before the pandemic.”
It’s not clear what triggered her statement. Real GDP has been higher than its pre-COVID peak in the U.S. since mid-last year and the U.S. is not the only country to have surpassed that threshold.
Perhaps there’s another explanation. Fudge’s tweet reminded me of the IMF forecast that the U.S., unlike other major countries, could even have higher GDP at the end of 2022 than was predicted back in 2019. Maybe that’s what Fudge meant?
If so, let’s put aside whether the previous or most recent forecasts would have or will prove accurate. The bigger issue, as I explained in Economics In One Virus, is that GDP is a very flawed metric for judging economic welfare when so many of our social liberties and economic choices or ambitions have been constrained.
Suppose GDP really does end up marginally higher at the end of 2022 than would have happened absent COVID-19. To echo Justin Wolfers: which world would Americans prefer to have lived in? The one predicted before the pandemic with slightly lower GDP this year? Or having higher GDP in 2022 but having endured “fewer jobs, more unemployment, more inflation, more government debt, more bankruptcies, worse schooling, less access to healthcare, worse mental health, greater illness and [more than] 800,000 lost souls”?
The answer, I suspect, is obvious. The pandemic and much of the policy reaction to it has been incredibly destructive. Even if measured GDP does exceed pre-pandemic expectations this year, we should not fall for a broken windows fallacy. By restricting our liberties, constraining our market choices, and worsening our health, a broader conception of economic welfare suggests this experience has made us much, much worse off.