Coronavirus update XIII – Time to reboot the economy

Public support for rebooting the economy has been growing. More and more people are desperate to return to work. To them, feeding their families is beginning to take precedence over their fear of the virus. They are tired of being confined to their homes. According to JPMorgan Chase in the last four weeks 17 million persons have filed for unemployment benefits. The current unemployment rate is 13%, and it will likely increase to 20%. These are exceedingly grim numbers not seen since the Great Depression.

Congratulations to us! For some two months we have diligently followed the guidelines of our political leaders, medical professionals and the president’s COVID-19 Task Force. We have washed our hands assiduously, worn masks, gloves and other PPE, followed the social distancing guidelines, and stayed home except for emergencies. We have endured long lines at the grocery store and voluntarily refrained from associating with friends and relatives. We have postponed weddings, confirmations, bar mitzvahs, birthday and anniversary parties, and other social occasions. We have sacrificed financially by closing our businesses and refraining from going to work.

After all this, we have flattened the curve, mitigated the effect of the pandemic. In most areas, hospitalizations, cases and deaths are levelling off or declining. The virus is not completely beaten yet, but the worst appears too be over. Now, we are ready for the payoff. Now we are ready to reopen the economy. Now, we want to go back to work. As President Trump has said, most Americans want to, need to work. We are a nation of workers, not layabouts.

In the last week or so, many governors have announced plans to reopen their respective states’ economies. I will briefly discuss some of those plans below. Some in the media have criticized them for jumping the gun. They maintain it is not safe yet. They acknowledge we have flattened the curve, but they fear a resurgence. A few have taken the position that we should wait until we have developed a workable vaccine, which will likely take over a year.

I disagree with those pundits. I think that is a bit extreme. Another year of this and we will likely have no viable economy to reopen.

I say, the country is not a homogenous entity. Some areas are densely populated; others are very rural. Virtually every state has some large cities and some rural areas. The CV has not affected all areas equally. This is obvious to most of us who have been paying attention, but apparently not to many in the media. Most of these media critics live in the densely-populated coastal areas. They do not have any interest or knowledge of what goes on in the vast heartland.

One of the main reasons why President Trump has left the process of rebooting to the governors was the realization that they know best what is appropriate for their respective states. So, now, as many states begin to reboot we will be seeing some radically different approaches, which will be tailored to each individual state or area. We should give these governors the benefit of the doubt, at least until and unless there are problems.

Below please find a few basic trends and specific examples based on news reports from Worldometer, CBS News, CNN, Fox News and, where indicated, my opinions.

1. As I write this, according to Worldometer, CBS and multiple other sources the US has reported about 990,000 cases and 56,000 deaths. 2. NY remains the state with the most cases (282,000) and fatalities (16,600). By the time you read this those numbers will likely be higher.

3. I mentioned the wide disparity of the effect of the CV. In contrast to NY, Alaska, for example, has reported 341 cases and nine fatalities, Montana 449 and 14, and Wyoming 502 and seven. So, one would not expect those states to follow the same timetable as NY and other densely populated states.

4. Every state that has announced a reopening plan has announced its intention of following (1) a phased-in approach similar to that suggested by the Task Force and (2) different timetables for different areas of the state. I think this is very sensible. Dip your toe in the water; don’t jump in blindly.

5. Note, some of the following specific plans may be subject to last minute changes.

6. Several neighboring states, which have overlapping economic interests and concerns, have decided to act in concert. For example, NY, NJ, CT, RI and DE have formed one group, and CA, OR and WA another. More may follow suit.

7. Perhaps, the most aggressive state has been Georgia. In recent days, it has authorized the re-opening of hair and nails salons, restaurants, movies theatres, in-person religious services, and even tattoo parlors. Governor Brian Kemp has received widespread criticism for this plan, and many observers are waiting/hoping to see if it will backfire. I say, he should know what is appropriate for his state, and someone had to be brave enough to be first.

8. Alaska is planning to re-open retail stores and dine-in service for restaurants, among others.

9. Montana Governor Steve Bullock has issued a plan to resume religious services on April 26 and retail stores the next day. If all goes well, restaurants, bars and breweries are expected to follow on May 4 with limited capacity. Schools may re-open as early as May 7 at the discretion of local school boards.

10. In contrast, NY Governor Andrew Cuomo will be taking a more conservative approach. He wants more testing, and he wants to see hospitalizations decline for 14 consecutive days. NY is close to that now. He is not planning to reopen anything until at last May 15 at which time there will be a monitored phased-in approach beginning with the more sparsely-populated upstate areas. Businesses such as manufacturing and construction will be among the first. If key health indicators continue to improve other businesses and areas will follow. Schools, beaches and public swimming pools will be more problematic. Cuomo said that areas such as NYC and LI are “more complicated.” I would expect them to be reopened last, perhaps last in the whole country. The whole process will require flexibility.

CONCLUSION

As I said, the country is on the cusp of being ready to reboot the economy. It will be a gradual, phased-in process, which is the best approach. It will vary by state and, within each state, by region according to their situation. Everyone agrees that the health and safety of Americans is paramount. At the same time, the longer the economy remains closed down the more difficult it will be to get it back to where it was. Remember, we were enjoying the best economy in our lifetimes, if not ever.

The economy may need a boost to restart effectively. Some people have been advocating another stimulus package. I am concerned about the long-term effects of all the stimulus packages. I am especially concerned about the idea, which has been floated by some Dems, to bail out some states that are in financial difficulty. I don’t think it’s fair for states that have spent money carefully and wisely to have to bail out those that haven’t.

I would advocate a rollback of the payroll tax for, say, six months. This would infuse cash into the economy immediately and would benefit both employers and employees.