Why has the Corona Virus response in the United States created economic risks that are exponentially greater than the original health risks?
Some answers I have heard are:
- We underestimated the potential of the Covid-19 virus when its numbers in the US were small. Our Leaders called it a “media hoax”, while failing to fully mobilize and focus the Federal Government and States to stop the virus’ spread.
- The Federal Government botched its release of testing kits, slowing down testing in the US for several weeks.
- The Government (I am being diplomatic, as this article seeks a broad audience) did not speak transparently about the problem with the credibility gap spooking markets who feared the problem was being underestimated.
- We are a free country where the authoritarian measures that the Communist Party of China cannot be replicated to track and control citizens to prevent the spread of the disease.
- The Pandemic Unit set up under the Obama Administration was disbanded by the Trump Administration.
- Enough funds and equipment were not made available by the Federal Government to States to fight the virus.
- The Scientists were not put in charge of the effort to stop the spread of the virus, and to deal with the rules, regulations and steps to reduce its impact on people and the economy.
- The media has caused an over-reaction to the COVID-19 crisis, with the economic implications now far outweighing the risks from loss of life and risks to the health system. The crisis is a media-caused “hoax” in that sense.
While all the above, except # 7 and #8 are true explanations for why we now face a severe economic downturn, the real explanation is much simpler. (It will be explained why #7 would not produce the needed solution, and #8 is inaccurate.)
HERE IS THE EXPLANATION FOR THE SEVERE, POSSIBLY CATASTROPHIC ECONOMIC DOWNTURN WE FACE.
NO CREDIBLE PLAN FOR WORKING THROUGH THE CURRENT HEALTH CRISIS, AND NOW THE ECONOMIC CRISIS, HAVE BEEN ISSUED BY THE FEDERAL GOVERNMENT. The key words are “CREDIBLE PLAN”.
Plan means a plan – a set of interlocking steps including testing, quarantines, and lock down (business, schools and other closings), which will shorten the critical path for flattening and then reducing new virus cases, so the lock down can be relaxed in phases OVER A RATIONALLY ARRIVED AT SET OF TARGET DATES, which can be communicated to consumers/citizens and the markets.
Several points about the United States CORONA VIRUS REMISSION PLAN:
It has to be a Federal Plan, communicated by the Federal Government, even if the Federal Government is coordinating and aiding the State’s responses to the virus.
- The virus is not just a State issue.
It can and will spread from State to State if not dealt with by the Federal Government on an overall basis. Confidence needs to be restored nationally. Let’s be clear – the virus’ impact could be in one or two hot spots and if we know that steps credibly limit the spread out of those hot spots, then economic recovery can occur elsewhere. But “credible” in this case, means national responses, communication and policies.
- The economic impact on the nation’s largest corporations, and particular sectors such as travel and hospitality, can only be mitigated nationally, because the impact on these is national in scope.
- Relief to small businesses also needs to be dealt with through targeted relief and payments directed by the Federal Government.
- Communications of overall progress of both Federal and State resources, needs to be collected, analyzed, tracked, summarized and communicated, at the Federal level. This will allow targets for eliminating lock downs to be coherently set and communicated, and to tell the overall story of progress or failure to consumers, citizens and markets.
- The virus is not just a State issue.
The main goal OF THE PLAN is to reduce possible new transmissions to an acceptable level (so we know the spread of the disease is reduced with a high probability) so economic lock downs can be relaxed. We want the plan to achieve the most value by eliminating lock downs that are most debilitating to the economy first.
Lock downs may need to be draconian, through a period that includes a full incubation period. It needs to include massive testing efforts so anyone who exhibits symptoms can be isolated if they have been exposed or if they exhibit symptoms and test positive.
HERE IS THE UPSIDE OF THIS REGIME. The period of lock down can be set to the shortest possible point where high degrees of assurance exist that spread is contained. We, the public have heard two weeks for incubation. But the right amount of time is a scientific and mathematical question.
Backup strategies need to be determined where the formula fails because some people are outliers. The risk of outliers (people whose incubation period is longer), must be handled in some credible way to prevent a resurgence.
- One final point about the United States CORONA VIRUS REMISSION PLAN:
Economic relief needs to be tailored to reach the impacted populations, not randomly spread across the citizenry. Beyond the questions of fairness – why should someone who is still working at full salary get $2,000 in relief, is the question of impact of the money. Those who are laid off due to the shock should get benefits to prevent them from dragging everyone else down, such as happened in the financial crisis. Granted, there are many problems in applying the principle of helping those are hurt by this crisis, but this should be the principle, both from the point of view of fairness, efficiency of use of dollars and blunting the impact of the economic crisis.
So, let’s deal with the question (proposition #8 above) whether this is a media created crisis, exaggerated by the media, with the exaggeration the cause of the incredible economic crisis we now may face. Here is the unequivocal answer – THE MEDIA IS NOT RESPONSIBLE FOR THIS CRISIS.
This is obvious if we consider the following chart from an excellent article in VOX,
- Covid-19 is more infectious than the flu, almost by a factor of 2.
- Covid-19 is harder to detect, because it has an incubation time of 14 days, during which we cannot see if an individual who has it, has it.
- Hospitalization rates are high – 20%, compared to just 2% for the flu.
- Finally, fatalities are 10 to 30 times higher for COVID-19. (I have seen multipliers as high as 100 times more fatal.)
This is not a disease you can ignore. To stop it, lock downs are needed in the absence of a vaccine. The US cannot afford, or we are not willing to afford, 50 – 60MM getting Covid-19 and literally a million people dying from the disease, plus impacts from overwhelming the health care system. Or at least my judgement is we cannot ignore the risk from this virus. Perhaps a debate can occur on what price the US is willing to pay going forward, to stop pandemics.
Now let’s deal with proposition #7, the assertion, that if only the scientists were running the United States CORONA VIRUS REMISSION PLAN, that all would be well. Here is the issue with this assertion – scientists, while fact-based in their assertions, are not always the best communicators, planners or decision-makers. In fact, decision-making is improved with open communication among a group of qualified stakeholders and experts. Creating the plan is best done by experts in large scale project planning, with the help of qualified executives stakeholders. So scientists are the experts, but they are not the only experts needed. There are trade offs to our Country that scientists are not always best at formulating, much less deciding or communicating.
What do I hope the United States CORONA VIRUS REMISSION PLAN would achieve? My hope is that by presenting a clear plan to citizens and markets, that it would add calm, a sense of clear purpose and direction, and avoid an economic depression just as bad as the actual disease. Markets would know that the worst will last a month, or six weeks, or some definite period. Remediation of the economic crisis could be based on these estimates and adjusted as needed. I would hope to avoid excessive lock downs, while also clamping down on the spread of the disease as quickly as possible.