National Insights

Did the Sturgis rally cost $12 billion in healthcare expenses – or add $12 billion to the U.S. GDP?

Let's examine how we calculate the size of our economy
By Constantine Valhouli  |  September 10, 2020 10:03 AM

Image via Pikist

According to a study covered in The Hill, the ten-day Sturgis motorcycle rally attended by over 400,000 people contributed to 266,000 cases of COVID-19. Assuming $46,000 of medical costs per case, this means that Sturgis added approximately $12 billion in health care costs.

Or, looking at this another way, the Sturgis motorcycle rally added $12 billion to America's GDP. Those debits in one column are credits to someone else.

The United States has long been positioned as the largest economy in the world, and yet the method by which this is calculated should be re-examined.

A recently-retired high-earning financial services manager who stopped working because of health issues remarked to me: "I've been fortunate to always made a good living, and to feel that I had contributed my share to the economy in taxes. But I realize that I'm adding more to the economy now, by constantly being in the hospital and becoming an annuity for the medical sector. I never billed $50,000 or $100,000 in a single day. But now I'm adding that to the bottom line of the hospitals on some days."

By the generally-accepted approach, this retired, high-income worker has been adding more to the GDP since he stopped working than he ever did while he was employed.

Extending this thinking into other areas makes us wonder whether the United States economy is artificially inflated to some degree. In Europe, education is seen as a fundamental right, and is understood to add to the economy overall by creating more skilled citizens. In the United States, students face crushing levels of school loans that essentially limits educational opportunities to those whose parents can afford to subsidize their learning. As of 2020, school loans represented $1.6 trillion in collective debt, representing the second-largest sector after mortgages.

Did the Sturgis rally add $12 billion to the U.S. economy, or cost it $12 billion? Does $1.6 trillion in school debt add to the U.S. economy, or represent an unnecessary expense that prohibits young people from moving forward with their lives, buying property, and forming households?