Which Is Worse, The Virus Or The Responses To It?
/As of this writing (approximately 4 PM on March 21) the Worldometer site has recorded 24,142 confirmed cases of the COVID-19 virus in the U.S., and 288 deaths. That would make for a death rate of 1.19% among confirmed cases. 1.19% would be a serious death rate, but of course there is no way of knowing whether the real denominator for calculating the death rate should be much higher, due to people who have contracted the virus but have not been tested. The number of such unknown cases could easily be a multiple of the 24,142, which if true would make the death rate half or even well less than half of the 1.19%.
To put these numbers in some perspective, the CDC on its website has estimates by year of the number of seasonal flu cases in the U.S., hospitalizations, and deaths. Summary:
CDC estimates that influenza has resulted in between 9 million – 45 million illnesses, between 140,000 – 810,000 hospitalizations and between 12,000 – 61,000 deaths annually since 2010.
This flu thing is very serious business. The numbers there are annual. Over the 10 years from 2010 to 2019, they estimate something in the range of 400,000 total deaths from the regular annual flu. Yes, they try to provide a vaccine (which varies in effectiveness by year), but mainly we go on about our normal business while this all these deaths are occurring. Nobody has ever considered shutting down the entire economy to control the regular annual flu, even with an annual death toll averaging 40,000 and going as high as 60,000 in some years.
When the COVID-19 thing started ramping up a few weeks ago, the essence of the message coming out of the government was a series of common sense public health measures. Wash your hands frequently. Avoid large gatherings. Keep “social distance” at work and in public places. Work from home if you can. As it became clear that this virus had its worst effects on people over 60, our kids pushed for myself and Mrs. MC (both over 60) to self-isolate in the country. Fair enough — we did it. But the kids remain in the City. According to a CDC report with data through March 16, 80% of the deaths are among people over 65.
But now in this last week, there has been a big change. The government response has gone over s tipping point from realistic concern to something approaching hysteria. Most of this has resulted from Congress and state governments getting into the act; but President Trump and his team deserve some criticism as well. At this point, there is very serious risk of permanent damage to the economy, not from the disease, but from the government over-reaction.
Let’s consider some of the recent measures, some already implemented and some still in the proposal stage:
As of today, the governors of four states — California, New York, Illinois and Connecticut — have issued so-called “stay at home” orders for all workers in what they deem to be “non-essential” businesses. As usual, these are blunderbuss, poorly-thought-through blanket commands. Here is the New York version. “100% Closure of Non-Essential Businesses Statewide . . . Exceptions Made For Essential Services Such as Groceries and Healthcare.” OK, but what is “essential”? Lots of things are just not amenable to being done from home. How about construction? How about manufacturing? How about the production of the TV news (not that I would mind seeing CNN and MSNBC go dark for a while)? How about truck drivers delivering all kinds of things? Large numbers of hourly-paid workers could face layoffs in the next few days or weeks.
At the federal level, the talk started with a set of relatively reasonable proposals for deferrals — IRS tax deadlines postponed to July, student loan payments deferred, HUD evictions temporarily suspended, etc. On a grander level would be some kind of large-scale liquidity facility, possibly administered by the Fed, providing loans to businesses experiencing sudden lack of customers through no fault of their own, to tide them through the crisis period. Airlines come to mind as an example. Economist John Cochrane in a March 19 post makes the clever suggestion of administering such a liquidity facility through the IRS, thus mostly in the form of interest-bearing tax deferrals. I could get on board with all of these things.
But then the nonsense word “stimulus” started to rear its head. In my view, the whole idea that wealth can be created (or the destruction of wealth avoided) by the government passing out money from the infinite pile of loot is a total fallacy. In this case the idea is particularly absurd, because even as the left hand will pass out the stimulus, the right hand is ordering sellers of goods to stop selling them. How exactly is that supposed to improve the economy? Treasury Secretary Mnuchin got the ball rolling by floating the idea of sending a check for $1000 to every American; and next thing you know, President Trump seemed to climb on board. The cost of that all by itself would be over $300 billion, all of which would have to be financed by borrowing a like amount in the bond markets, and most of the money would go to people still getting their regular pay, or to children, or even to rich people. This would be the national policy equivalent of you borrowing $200,000 in student loans to attend basket weaving school. Needless to say, Congressional Democrats immediately jumped in and upped the ante, with Senators Michael Bennet, Cory Booker and Sherrod Brown proposing to make the amount $4500 per American. Hey, can I join this game? How about a million dollars a head? I mean, why shouldn’t all Americans be rich?
Other things Trump has mentioned in the last few days have included the government taking equity stakes in companies in return for bailouts, and the forbidding of things like dividends and stock buybacks for some period of time. The details of these things, as well as the size of the handout checks, are apparently in the process of Congressional negotiations at this moment. Past experience teaches that anything that goes through Congress comes out worse than it went in.
As of this writing, I haven’t seen a word from any of these people about how long this is to last. President Trump, to his partial credit, has at least used the words “short” and “temporary” a few times. But even he has not mentioned any date. So is this going to be two weeks, or 30 days, or are we all going to be locked into our houses for a full year until a flawless vaccine finishes FDA testing?
The bottom line is that preventing every single potential death from the Chinese virus is not the only goal here. Everything in life involves tradeoffs. Getting the economy back on track as quickly as possible deserves to rank as high in our priorities as does reasonable minimization of deaths from the virus. Otherwise, what’s to keep the next new virus, and the next, and then the next, from shutting down our economy for months on end. And there will be more of these viruses. It’s just not possible for the government to guarantee us all a 100 year life span, let alone to eliminate all downside risk of life.
UPDATE, March 22: You won’t be surprised to learn that essentially every business lobby out there has mobilized in Washington to get itself billions — or in some cases trillions — in the upcoming blowout “stimulus” package. A guy named Matt Stoller, with a blog called BIG, has compiled some data. Excerpt:
Elon Musk and Jeff Bezo want "$5 billion in grants or loans to keep commercial space company employees on the job and launch facilities open." They also want the IRS to give them cash for R&D tax credits. CNBC reported that hotels want $150 billion, restaurants want $145 billion, and manufacturers wants $1.4 trillion. And the International Council of Shopping Centers wants a guarantee of up to $1 trillion. The beer industry wants $5B. Candy industry wants $500M. The New York Times reported that "Adidas is seeking support for a long-sought provision allowing people to use pretax money to pay for gym memberships and fitness equipment."
I guess the whole idea that there are any limits is gone, and everybody now has a birthright entitlement to absolute downside protection from Big Sugar against any and all risks in life. This can get very destructive very fast. This morning I got an email from a small museum where I am a member, asking me to write to my Congresspeople to urge them to support a bailout for museums! Really?? How about the bailout for Contrarians? Or maybe I should just figure that I’ll be getting the million dollar check that goes to all Americans. I guess that will be sufficient.
Meanwhile the CCP virus U.S. death count is up to 414 as of 6 PM.