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2020-04-17

The Wrong Decisions at the Worst Moment

The Trump Administration is mulling over when and how to resume "normal" economic activity. If past is prologue, they will manage to make the wrong decision at the worst moment. Here's how:

The president seems to focus on a single point of fact at a time. Like he fixated on the stock market for a time. Probably right now the fact capturing his attention is that more than 22 million Americans have filed for unemployment benefits within the past month. To say that is unprecedented understates its novelty. No society has seen an event like that. It's not the stock market crashing in 1929. It's not the oil price shocks of the 1970s. This is a body blow to the economy. We have been pushed off the cliff.

Statista.com from the IMF
There's no fixing this in the short term. There's no "V" shaped curve for economic activity. Those predictions are predicated on the notion that we will have an effective treatment within a year and a vaccine for all 7 billion human inhabitants within 18 months.

The outbreak will persist and we have lost those opportunities, if we ever had them. The best we can do is provide continued assistance to those suffering by supporting incomes, probably by shoring up the state unemployment systems with federal dollars. Because all states have to balance their budgets, they are only months away from having to choke off their spending.

We also need to maintain the quarantine and lockdown. Until we know who is infected, who is immune (if anyone is), and where those people are, lifting the restrictions is folly.

Will the president act wisely? I highly doubt it. It runs in the face of the hardy individualist myth of America. His approach will focus on the quarantine. He will try to say that the lockdown orders should be ignored and people return to work and normal life. He may tailor that for places where the curve is flattening, like New York, or where it has yet to ramp up. That's the mistake. Without understanding the epidemic curves–through a massive testing program that does not exist–we will induce another exponential surge in cases. We would see another cycle of growth in infections, followed by hospitalizations, followed by deaths.

We are going to see those humps anyway, but by acting blindly they will be more severe and therefore more deadly.


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