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Yet Another Rant on Coronavirus & Trump

Summary:
Could "reopening America for business" on Easter backfire? Oh, yes it could. Oh, it definitely could backfire: BIGTIME. The experience so far is that, in a society not undertaking social distancing, coronavirus cases double in a little less than five days—grow 100-fold in a month. If, say, the virus has been largely suppressed and only 10000 in the U.S. have it Easter week, then after the u.S. is opened up 1 million will have it on May 15, and then 100 million on June 15, at which point the epidemic will have pretty much run its course. But from May 1 to June 15 hospitals will have been overwhelmed. The likely death rate will have been not 1% but 6%. 5 million additional Americans will have died. In return we will have produced an extra trillion of stuff. That's a tradeoff of

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Could "reopening America for business" on Easter backfire? Oh, yes it could. Oh, it definitely could backfire: BIGTIME.

The experience so far is that, in a society not undertaking social distancing, coronavirus cases double in a little less than five days—grow 100-fold in a month. If, say, the virus has been largely suppressed and only 10000 in the U.S. have it Easter week, then after the u.S. is opened up 1 million will have it on May 15, and then 100 million on June 15, at which point the epidemic will have pretty much run its course. But from May 1 to June 15 hospitals will have been overwhelmed. The likely death rate will have been not 1% but 6%. 5 million additional Americans will have died.

In return we will have produced an extra $1 trillion of stuff.

That's a tradeoff of $200K per life, which is not a good tradeoff to aim at making.

And, while it could be better, it could be much worse...

The right way to do it is to lockdown while we test, test, test, test, test:

  • Test a random-sample panel of 10000 Americans weekly to get a handle on the progress of the disease.
  • Test everyone for antibodies.
  • Let those who have had the disease and so are no immune go back to work—after testing to make sure that they are immune.
    • Indeed, draft those who have recovered to be hospital orderlies and nurses.
  • Make decisions based on knowledge of where the epidemic is in the community, and tune quarantine, social distancing, and shutdown measures to those appropriate given where the epidemic is.

But we do not know where the epidemic is.

And because we are not testing on a sufficient scale, we will not know when and if the virus is truly on the run until a month after the peak, when deaths start dropping. And even then we will not know how much the virus is on the run.

And removing social distancing before the virus is thoroughly on the run means that the virus comes roaring back.

Once the virus is thoroughly on the run, then normal public health measures can handle it:

  • Test, test, test.
  • Test patients presenting with symptoms.
  • Trace and test their contacts. Do what Japan and Singapore did—close to the epicenter in Wuhan, yet still with true caseloads lower than one in ten thousand.
  • Test those crossing borders, symptomatic or not.
  • Test those moving from city to city via air.
  • Test a random sample on the interstates, to see how much virus is leaking from place to place that way.
  • Test a random sample of the population to see whether and how much the disease was established, and then test another one.

Wherever community transmission becomes reestablished, apply the Wuhan lockdown for at least three weeks, so the caseload could be diminished enough so that contact tracing could be resumed.

Build up a database of those who tested positive and are presumably now immune so that they can be on the frontlines of treatment and contact with those possibly newly infected, and reopen the economy by putting them in the jobs that have high human contact and thus high virus transmission rates.

Jim Stock at Harvard has lots of good ideas and has thought a lot about how to do the Hunker Down. He is actually the person I would be asking how to do this—very smart, and has thought hard over the past month about it.

My view, however, is that right now we are scr--ed AF.

It is the end of March. The United States has tested only 500,000 people. There is no nationwide random sample time series. An awful lot of symptomatic people were not tested, and were instead sent back into the community. By the metric of the speed of growth of reported cases since the establishment of the virus dated to the hundredth first-reported case, the U.S. has performed worst of any country: worse than Italy, worse than Spain, worse (we think) than Iran. The 105,000 cases reported as of the evening of Fr Mar 27 are just the tip of the iceberg. From 1700 currently reported deaths so far in the United States, we might guess that there were between 60 and 170 thousand cases active at the start of March, which have grown to between 600 thousand and 2.5 million new cases, with perhaps the same number coming in the next week.

But we really do not know where we are.

We have not imposed the Wuhan lockdown.

If we had imposed the Wuhan lockdown, then three weeks after the lockdown had been imposed, the Hunker Down could start to be relaxed. Then, if we had enough testing capacity, we could start to relax knowing how much and where we could do so without the virus roaring back. Public health could then do its normal job: testing a random sample, testing all those symptomatic, tracing contacts, quarantining, and so keeping the spread slow enough that the health care system is not overwhelmed and that the bulk of the cases come next year or the year after or even later, by which time our virologists will have worked miracles.

But Trump, Mnuchin, Kudlow, & co. appear to want to draw to an inside straight and make the existential bet that transmission will melt away with the coming of spring and the warming up of the country. It might. 10%.

I have not found any economist who will say in private that that is not a very bad idea from a cost-benefit risk point of view.

And then, in two months, we are going to want to restart all the businesses that were functioning as of March 15. Nobody should go bankrupt as a result of anything that happened between March 15 and May 15 this year. That should be the proper goal of economic policy: to create a moment of Jubilee in the middle of this spring.

How would I do it, if I were running economic policy? Medical tests, treatment, tests, food, utilities, plus everything we can do that does not require human-to-human contact within six feet—that should be the extent of our economy for the next three weeks. All else should be shut down. And then, in a month, everyone should go to the job they had on March 15. And if the financing isn't there to run your business on May 15—if you are bankrupt?

That is what the Jubilee is for: the government assumes your debts.

But what if people are worried about the now-higher government debt? That is good reason to impose a highly-progressive tax on income and wealth both to reassure investors that the long-term finances of the government are sound, and to recoup some of the unearned increment that will be captured over the next month by those who turn the lockdown into a source of financial advantage.

That is what the U.S. should do. That is not what the U.S. will do. For one thing, we do not have and are not making enough tests.

With respect to the "China" questions:

  • The U.S. has passed China in reported number of cases.
  • In two weeks, the U.S. is going to pass China in reported coronavirus deaths.
  • Unless China loses (or has already lost control of the virus and is suppressing the news), for the next 50 years China's rulers will say:
    • Our society handled this much better than yours did.
    • Look to us rather than the U.S. for models and as your partners.
  • The U.S. has lost all global leverage over China—unless they are suppressing very bad virus news, and I see only a 10% chance that they are.
  • When the U.S. economy reopens, U.S.-China negotiations are likely to take the form of us saying "please allow us to buy your stuff on whatever terms you offer".
Bradford DeLong
J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

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