Thursday, May 14, 2020

The Covid-19 Political Playbook

It seems that everything today is politicized.

Covid-19 is no exception.

The 2020 election may be determined on which party gets it right on the decisions that are being made now on reopening the American economy.

Republican governors in states like Florida, Georgia, Texas, Tennessee and Ohio are moving forward to reopen the economy in their states.

Democrats in states like Illinois, Michigan, California, Washington and Virginia are extending lockdowns and shelter-in-place orders.

We are told that we have to follow the science. However, each of these states have public health directors and experts. How can one state decide to open and one decide to stay closed if the science is clear?

A lot of it is politics and one side or the other is going to look better than the other come November.

If states like Florida and Georgia get their economy going and do not see a big uptick in cases the Republicans are going to look pretty good.

Conversely, if these states have to shutdown again because of a surge in cases the Democrats are going to be quick to say "I told you so." It will also not be favorable for President Trump's election prospects.

If we don't see cases surge in the red states, it is going to put a lot of pressure on the Democrat states and it will be hard to keep a lid on protests in the state of those who want to get back to work, get their hair done, go to the gym or the beach. 

Due to the lack of consensus right now, both sides are walking a tightrope without a net. We are in uncharted territory.

In a normal world, there would be a lot of motivation by everyone to get back to work and reopen. Nothing works if money is not flowing in an economy. Everyone struggles---families, businesses, schools, government and social service organizations.

We saw that in the last major pandemic in the United States in 1917-1919. At that time decisions on shutdowns and quarantines were made exclusively at the local level. The federal government did almost nothing. Local officials knew they could not expect help from the state or federal government. They had to act in their own self interest knowing they were solely responsible for the outcome balancing both the public health and economic dimensions of the issue.

Cities did not shut down businesses during that pandemic as they recognized it would actually worsen their situation. They focused on isolating the sick, protecting the most vulnerable by closing schools (the young were the most likely to die from the Spanish flu) and banning mass gatherings which generally included closing saloons. They also did not order anyone to "stay-at-home" or try to limit civil liberties unless they were sick.

A 2007 paper in the Journal of the American Medical Association studied what is referred to as the "nonpharmaceutical interventions" in response to that pandemic.

Credit: JAMA, August 8, 2007

What I found interesting in the paper were the types of interventions and the durations of these actions compared to what we are experiencing today. The chart below summarizes the interventions and the median durations of each.  Notice that you don't see anything about any business closures as an intervention.

The median duration of any intervention (or combination of interventions), bans or closures was around 4 weeks. However, a combination of various intervention measures pushed the duration higher in the chart below. For example, closing schools, implementing quarantine measures and a ban on large gatherings in combination for a one week period would be considered 21 days of intervention in total.

This chart gives you a broader perspective on the varied responses that individual cities had to the pandemic.

One thing I found interesting in the paper was that New York City and Chicago never closed their schools during the pandemic in 1918 despite the fact that the young were most vulnerable to the virus. How times have changed.

I provide this as context to show that it is not natural or normal to want to go to extra lengths to continue an economic shutdown to curb the pandemic in a situation when hospitals are not overwhelmed and over half the deaths from the virus are from nursing home residents.

It is particularly abnormal when the resistance is from Democrats and the effects of the lockdowns are falling disproportionately on what they say they care so much about---middle or lower income workers, minority workers, education, health care and social assistance.

What is really going on here? Why are Democrat governors so willing to ignore what is happening to many of their core constituencies?

The only logical explanation is that the Democrats are using Covid-19 to play political games.

What other explanation is there when you look at the facts and consider the human and economic toll of the lockdowns?

What is the political playbook they are using?

 #1-Extend the economic lockdown and exacerbate the economic pain in order to damage President Trump leading up to the 2020 election in the hope that he can be defeated.

#2-Keep people out of work in order to create more dependency among them so that they believe that the only solution to their problems is government assistance. Doing this also acts as an attack on our private, employer-based health care system. If people do not have jobs they will necessarily require government-sponsored and subsidized health care that eases the way to transition to a single-payer system in the future.

#3-Create budget deficits at the state and local government levels that are so large that there is political pressure for the federal government to provide a massive bailout package that includes money for underfunded state and local public sector pension programs. It will be soon said that if this is not done we will soon see that there is no money for police and fire protection and money to pay teachers.

Democrats have been known to say that you should never let a crisis go to waste. Covid-19 seems to be another example of that.

Look no further than the measure that Speaker Nancy Pelosi unveiled earlier this week in the form of a fourth Covid-19 relief bill that she wants the House to vote on tomorrow. $3 trillion has been spent on three previous Covid-19  relief bills.

Pelosi proposes to spend an additional $3 trillion of which the first item mentioned in the bill is $1 trillion in aid for state and local governments. It includes a provision that would reinstate an unlimited state and local tax itemized tax deduction for high income taxpayers for two years. The bill would also provide an increased amount for a second round of economic impact payments to American households, extends the additional $600/month unemployment benefit into 2021, provides health care insurance subsidies, allocates $175 million for rent and mortgage subsidies and a 15% increase in food stamp benefits among other Democrat wish list items.

If this would pass it would bring Covid-19 federal government spending to $6 trillion. The Pelosi bill would equal the combined total spending in the first three relief bills that have already became law.

Of course, that federal spending is really deficit spending as we don't have current revenues to cover it. That means $6 trillion in new federal debt will be added to pay for all of this.

Let's put $6 trillion in additional debt in context.

We did not exceed $6 trillion in federal debt until 2002. In other words, it took 213 years to put on that much debt in the United States. Could we be on our way to adding that much debt in less than 100 days this year? 

Let's look at it another way. We added about $23 billion in debt at the federal level in response to the Great Depression between 1929 and 1939. In today's dollars, that would be $430 billion. We have already borrowed 7 times that amount in Covid-19 relief measures and Nancy Pelosi wants to borrow another 7 times that amount in one bill!

More sobering is to consider the fact that the United States added $216 billion in debt to fight World World War II between 1941 and 1945. In today's dollars, that would be about $3.5 trillion. In other words, in our response to Covid-19 we have already borrowed almost as much as we did to fight World War II. Pelosi's bill would mean that we would almost double that amount in spending on Covid-19 relief.

Most of what we are doing right now would be unthinkable to any of our forefathers.

It would simply be unfathomable for them to see the way that politics is shaping our response to Covid-19.

You have to think that they would also believe it was unconscionable to put the burden of this additional debt on future generations of Americans.

1 comment:

  1. Thanks for the info. The research was interesting and informative. Your summary that we don't now yet know the best path forward is supported by the relatively even distribution of choices of states facing similar circumstances.

    Left path?, Right path? Hunches aside, who knows?

    The beauty of this social experiment is we will know more in probably under two months.