Swine Flu Threatens Fragile Economy

Swine Flu fiscal Imapact

If the swine flu were to become a pandemic in the United States, the first concern would be, of course, saving lives. In the worse-case scenarios, a majority of Americans would most likely not fall ill, but they would be impacted financially. A flu pandemic would have widespread negative effects on the economy, perhaps even worsening the current recession just as some have suggested possible "green shoots" of economic revival.

The Congressional Budget Office estimated that a severe flu pandemic could infect 90 million people, result in the death of more than 2 million and would cause a 4.25 percent drop in the nation's gross domestic product. A milder pandemic, similar to those in 1957 and 1968, could lead to 75 million people becoming sick, 100,000 deaths and a drop of 1 percent in the nation's GDP.

The CBO economic estimate is conservative compared with those of other economists who forecast the nation's GDP could decline by as much as 6 percent. The International Monetary Fund warned that the fallout from a pandemic could expose some "financially vulnerable enterprises to the risk of bankruptcy."

In normal economic times, a drop this big could push the country into a "major economic recession" according to a report from the Trust for America's Health. And that conclusion comes from a report written when the U.S. economy was not even in a severe recession.

In order to avoid contact with people who might be infected, airlines would see a drop in passengers. Public gatherings like shopping malls, movie theaters, concerts, restaurants, sports events, even schools might close if people feared being around others who could be sick. Mass transit systems ridership levels could plummet. Businesses would experience high absentee rates because people chose to stay at home, resulting in lost productivity. The Trust for America's Health estimated absenteeism could rise to 25 to 35 percent globally. Hospitals would be overwhelmed with patients and the hospitals might have to be isolated.

The CBO estimated that a flu pandemic modeled on the severity of the 1918 outbreak could result in the following: • 80% drop in demand for arts, entertainment, recreation, accommodation and food services. • 67% drop in demand for transportation and warehousing. • 10% loss of demand for agriculture, mining, construction, retail trade, finance. • 15% increase in demand for health care and social assistance.

Some experts, however, disagree with the health care figure. They believe health care could be impact negatively as people cut back on spending like regular doctor visits, especially if patients decided to stay home to recover. Also, health care systems could lose money from the treating the underinsured and uninsured.

All of these losses, however, come with qualified possibilities: would, could, might. "Just as it is difficult to forecast the severity of a pandemic, it is hard to predict its economic effects, even if the outbreak's scope and severity are known," wrote the authors the CBO report. What does happen depends on how pervasive and protracted the flu pandemic is, as well as how states and communities respond to contain any outbreak.

And if people chose to stay home, that could actually help in preventing further spread of the disease, according to the World Bank: "One lesson from the SARS episode is that a prompt and transparent public information policy could help reduce the economic costs of an epidemic."

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