For NY's Wounded Economy, Second Wave Could Be "Worst Possible Outcome"

New York's finances are in historically terrible shape. The State and City are both facing multi-billion dollar budget deficits. The MTA has said it will have to cut bus and subway service by 40% in the new year if they don't receive $12 billion in aid, immediately. The Republican leadership in Congress and the outgoing Trump administration appear unwilling to help deliver federal relief before the end of 2020.

But as dire as this all sounds, experts say they are more worried about a second wave of COVID-19 infections, and the ensuing mass death, lockdowns, and job loss, that could truly create long-term devastation to the state's economy and all New Yorkers.

"While the situation is challenging and the gaps are very real, it’s not as if cupboards are totally bare," State Comptroller Thomas DiNapoli said of the state and local budget deficits. "If we go into a lockdown, and we don’t have any additional help from Washington, that could really trigger the worst possible outcome," DiNapoli explained. "We really could have a crisis."

Ronnie Lowenstein, the director of the City's Independent Budget Office, said that the city has so far ably weathered an $8 billion shortfall with a combination of rainy day reserves, cuts, and nearly a billion in deferred payments to city employees, and has done enough to "meet the needs for additional teachers and all the other things that the pandemic is requiring them to do."

"I’m very worried about another wave that will increase the misery level from what we’ve got now to something considerably worse," Lowenstein said.

On Thursday morning, New York City's seven-day average positivity rate rose to 2.6%, representing more than 10 straight days of increase. The percentage is a far cry from the double digit positivity rates the city saw in the spring, but it is flirting with the 3% threshold that Mayor Bill de Blasio said would trigger the complete closure of in-person learning at public schools. According to the city, 103 ZIP codes out of 177 in the five boroughs now have average positivity rates at or above 2%.

In response to the rising numbers, Governor Andrew Cuomo said on Wednesday that gyms and bars and restaurants would have to close by 10 p.m., and that certain hotspots would have additional restrictions, like prohibitions on private, indoor gatherings of more than 10 people.

No additional restrictions have been placed on indoor dining in New York, which is allowed at 25% capacity, though some epidemiologists, including one who sits on President-elect Joe Biden's COVID-19 task force, believe it is now time to eliminate it, in addition to other mitigation efforts that would prevent New Yorkers from being indoors together.

"Simply put, mitigating the pandemic is crucial to New York's economic recovery," said Andrew Rein, the head of the Citizens Budget Commission, a budget watchdog group that stresses fiscal responsibility. "The state needs to use the best and timely data and respond to changing circumstances as fast as possible, whether it be tightening or loosening restrictions on activity."

Representatives for Governor Cuomo did not respond to questions about how the governor and his team weighed the economic impacts of additional restrictions to prevent a second wave, against the damage a second wave would cause should the virus spread the way it did in the spring, prompting the entire state to go on "PAUSE," with only essential businesses open and all non-essential workers ordered to stay home.

James Parrott, an economist at the New School who has co-written several reports about the pandemic's effects on New York City, said that elected officials and policymakers should not be too concerned about negative economic effects that new restrictions might have, in part because New York's recovery has been slow compared to the country as a whole (the city's unemployment rate stands at 14% compared to the U.S. rate of 8%), and because no real recovery is possible if the pandemic continues.

"The only way we’re gonna get any meaningfully sustained jobs and economic rebound is to get the coronavirus under control. I think the restrictions the governor is reinstating are part of getting it under control, so in my opinion, the short term adverse effect on unemployment is marginal given the broader context," Parrott said.

"The caveat to that is, NYC doesn’t have a great wall surrounding its borders," Parrott continued. "There’s absolutely no substitute for having an intelligent and effective national approach that’s bought into by governors in all 50 states. We’re kidding ourselves if we think New York can somehow prevail alone."

Dede Lahman, a co-owner of Clinton Street Baking Company on the Lower East Side, said that they have been able to bring back 16 of their 40 pre-pandemic employees thanks to the 25% capacity indoor dining allowance. She said that she felt restaurants in New York City were being treated like "the sacrificial lamb," forced to completely reconfigure their businesses to new standards while still expected to pay their exorbitant rents with far less revenue.

"If it's necessary for the city to roll back a bit in the service of the health of New Yorkers, we’re on board," Lahman said. "Everyone has to do their part. But at a certain point, we are the ones who have to keep taking the fall."

Moonlynn Tsai, who co-owns the popular Malaysian restaurant Kopitiam in Manhattan's Chinatown, said she wasn't sure how her business would survive a second wave. "When the pandemic first hit, we were doing 3 to 5% of our normal sales," Tsai said, noting that they have never breached 15% of their pre-pandemic sales. "If we hit 10%, we celebrate," said Tsai.

“I’m very nervous that with this new wave happening, and people who had been so supportive of Kopitiam [in the spring], that everyone is on the same boat this time around. If it’s going to happen again, I am very nervous that guests aren’t going to be as supportive as they were."

Tsai added, "Does that mean we have to let go of some people on our team again?"

Economists expect New York's pandemic downturn to last well beyond the existence of a vaccine, and keeping the restaurants, retailers, and cultural institutions that have driven New York's success in the past will require long-term investments and strategies.

"The question is, what will we do for the city and the state to develop a longer term plan for how we’re gonna manage through not just the current year, but the next two to three years. Because I really think it’s going to take that long for the economy to recover," Comptroller DiNapoli said.

Economic recovery isn't truly possible without the MTA either, said Lowenstein, of the IBO.

"They are the lifeblood of the city. You couldn't have a city like New York without a subway system. Unless that comes back and people are safe in it, you can’t get people in and out on the scale necessary to run this place."

Rein, the CBC head, believes the state and city shouldn't wait for Congress to start finding efficiencies in future budgets, and planning ahead. His agency has projected $91 billion in deficits for the state, the city, and the MTA over the next four and a half years.

"What I'm truly afraid of happening is nothing. Is sitting on our hands and hoping that the federal government takes care of all the problems forever," he said.

But the federal government has already been cushioning the blow for as many as 700,000 New Yorkers, who are currently receiving an extra $250 a week in pandemic assistance from the CARES Act. Those benefits expire at the end of December.

"It’s very obvious that there’s such a critical need for more federal economic assistance and that will help make it easier for people to accept greater restrictions on business activity that are absolutely essential to get the virus under control," Parrott said. "It’s not either or. There’s no choice."

A second wave would make any discussion of planning and triage seem quaint.

"If there’s no federal action by late January, that will be an indication that some leaders in this country are willing to accept a level of economic deprivation that is unsustainable and probably inhumane," Parrott said. "I don’t see how they could stand by and not act."