Tag: covid-19

Should the State mandate or advise?

It depends of course. But in America, which was established to empower each individual to make their own decisions, the state should only regulate those individual activities that might harm others such as violating property rights. This attitude presumes that each of us cares more about our wellbeing than does anyone else and know better how to achieve it taking account of our differences in tastes, interests, and risk preferences. It has resulted in a society of more prosperous and happier members.

This can be contrasted with the view that the average person is not intelligent enough or self-motivated enough to maximize their potential and needs to be guided by smarter, wiser people.

A society in which each individual enjoys the maximum freedom of choice hardly means that the government has little or no role in our wellbeing. In addition to providing public safety, shared institutional and physical infrastructure development, and the adjudication and enforcement of contracts (the rule of law), government can contribute to the provision of the knowledge to help inform the individual choices we each make. I want to review two very different areas of government involvement that have reflected the above conflicting attitudes of the government’s best role—monetary policy and public health policy.

Section 8 of the US Constitution gives the federal government the power “To coin Money, regulate the Value thereof,…” Our twelve Federal Reserve Banks and the Board of Governors of the Federal Reserve System carry out that mandate via a system of market determined prices of goods and services and an inflation target of 2%. While I would prefer a monetary policy in which currency was issued or redeemed at a fix price for a hard anchor (traditionally gold) in response to market demand (currency board rules), the Fed has behaved very well within its inflation targeting regime over the past two years (after keeping its policy interest rate too low until two years ago).

A successful inflation targeting policy requires keeping inflation expectations anchored to the target (2% in the US) so that economic wage and price decisions are made in light of that expectation. But todays’ policy actions are only fully felt over the next year or two (what Milton Friedman called “long and variable lags” in the effects of policy). Federal Reserve policy is implemented largely by setting the rate at which it supplies the money it creates to the market. If it sets that rate below the so called neutral rate, it must supply money to keep the rate low. If it sets the Fed Funds (and related) rate above the neutral rate, it must absorb money from the market to keep the rate high. Setting its policy interest rate is the lever by which it controls the rate at which the money supply grows. Each Federal Reserve President and Governor must evaluate all available information about economic activity most likely over the next one to two years and determine in like of that what monetary growth is most likely to result in 2 percent inflation over that period. If market participants believe that the Fed’s choice is most likely to result in achieving the stated target in the future, their wage and price decisions will anticipate that inflation and thus bring it about.

It should be obvious that if Fed officials are honest it attempting to achieve their target and explain as fully as they themselves understand the prospects to the public and the public has confidence in the Fed’s commitment, this is the best that can be done. In fact, the Fed deserves high marks for such transparency in our uncertain and evolving world. Each person and firm make their own forward looking decisions in light of their best guesses of future conditions. The Fed’s guidance is the best and most the Fed can do to bring or keep inflation on target.  

When governments don’t trust “the people” to make their own decisions (they are not smart enough or are two lazy or whatever), they must mandate the “proper” behavior. Consider our approach to the public’s health during the Covid pandemic. Whether government should offer advice and provide information on what is known about a disease such as Covid-19 is complicated by the fact that we should not be free to expose others to communicable diseases. In the case of Covid the government’s understanding of its nature and best protection grew and evolved over time. But the US public heath agencies lost credibility from the beginning by telling well intentioned lies.

“In early March 2020, Dr. Fauci said ‘there’s no reason to be walking around with a mask.’ In the same interview he said people could wear masks if they liked, but they wouldn’t get perfect protection, and it would further pinch what at the time was a short supply of masks for doctors and nurses.” PolitiFact | Marco Rubio says Anthony Fauci lied about masks. Fauci didn’t.

But more to my point, CDC officials thought that their shut down and isolation mandates would be more effective than allowing individuals to determine how best to protect themselves and others. The subsequent evidence suggested that they were wrong. Any benefits were outweighed by very substantial costs. Read the following articles and studies for examples.

Scott Atlas on Lies

“I explore the association between the severity of lockdown policies in the first half of 2020 and mortality rates. Using two indices from the Blavatnik Centre’s COVID-19 policy measures and comparing weekly mortality rates from 24 European countries in the first halves of 2017–2020, addressing policy endogeneity in two different ways, and taking timing into account, I find no clear association between lockdown policies and mortality development.” https://academic.oup.com/cesifo/article/67/3/318/6199605?login=false  

“The most restrictive nonpharmaceutical interventions (NPIs) for controlling the spread of COVID-19 are mandatory stay-at-home and business closures. The most restrictive nonpharmaceutical interventions (NPIs) for controlling the spread of COVID-19 are mandatory stay-at-home and business closures. Given the consequences of these policies, it is important to assess their effects. We evaluate the effects on epidemic case growth of more restrictive NPIs (mrNPIs), above and beyond those of less-restrictive NPIs (lrNPIs)….

“After subtracting the epidemic and lrNPI effects, we find no clear, significant beneficial effect of mrNPIs on case growth in any country…. While small benefits cannot be excluded, we do not find significant benefits on case growth of more restrictive NPIs. Similar reductions in case growth may be achievable with less-restrictive interventions.”  January 2021 study

Worrying About Mandates and Lockdowns as Delta Variant Hits Unvaccinated Californians

Lockdown Lessons Learned During Covid

We are two and a half years into the Covid-19 pandemic. Data has accumulated on the effectiveness of lockdowns in reducing deaths and of the costs associated with lockdowns. The overall effectiveness of lockdowns must consider both aspects. Moreover, lockdowns took different forms in different places—total, targeted, etc.  Dyani Lewis has provided a very careful review of the major studies of these data in Nature  “What Scientist have Learnt from Covid Lockdowns”

To overcome issues of correctly attributing deaths to Covid, excess deaths is generally used (excess from all causes each period over the recent—usually five year– average for the same period). “The pre-vaccine period of the pandemic does show that countries that acted harshly and swiftly — the ‘go hard, go fast’ approach — often fared better than those that waited to implement lockdown policies. China’s harsh lockdowns eliminated COVID-19 locally, for a time.” But the economic and public moral costs in China are very large and continue to mount. “The most effective measures were policies banning small gatherings and closing businesses and schools, closely followed by land-border restrictions and national lockdowns. Less-intrusive measures — such as government support for vulnerable populations, and risk-communication strategies — also had an impact. Airport health checks, however, had no discernible benefit….

“The impacts of lockdowns also differed from one pandemic wave to the next. By the time second waves emerged, so much had been learnt about the virus that people’s behaviour was quite different…. These changes dampened the extent to which countries benefited from lockdowns” because people adjusted on their own.

“There’s a fundamental difficulty with analysing the effects of COVID-19 lockdowns: it is hard to know what would have happened in their absence…. [Many studies] could have overstated the size of the benefit because it assumes that without lockdown mandates, people wouldn’t have reduced their social contacts. In reality, rising deaths would probably have changed people’s behaviour….

“And lockdown policies did bring costs. Although they delayed outbreaks, saving lives by allowing countries to hang on for vaccines and drugs, they also brought significant social isolation and associated mental-health problems, rising rates of domestic violence and violence against women, cancelled medical appointments and disruption to education for children and university students. And they were often (although not always) accompanied by economic downturns….

“Pure economic analyses of whether lockdowns were worth it generally try to estimate the value of lives saved and compare that with the costs of economic downturns. But there is no consensus on how to make this comparison…. Not all harms can be [objectively measured]. Loss of education because of school closures might indirectly harm children in the long run, potentially decreasing their future earnings and placing them at greater risk of poorer health outcomes…. Such harms are so far off — decades, in some cases.”

Learning the lessons that experience teaches us is very important when formulating public policy. But extracting those lessons can be difficult. Lewis’s summary is the best I have read, and I urge you to read it. I continue to believe that when we are provided the best understanding available (which obviously grows over time) we will each make the best decisions for ourselves and our families, striking the balance that is best for each of us.

Where Does Senator Josh Hawley Stand?

Upon what basis should we make our decisions to do or not do something? Upon what basis should the government take the right to make decisions for us? The quality of our individual choices depends on the values and principles that guild us. These profoundly influence the quality of our lives in our given or chosen societies.  I have discussed this issue before:  “The great divide-who decides” 

The issue of Covid-19 vaccination mandates and related issues are currently providing vivid and noisy examples of these questions. A few of my reactionary libertarian friends (in contrast with more thoughtful libertarians) insist that it is their right to decide whether to get vaccinated or not. Perhaps, but it is not their right to knowingly infect others (the freedom to swing my fist ends at your face). Specifically, the unvaccinated do not have the right to be where they are not wanted or permitted by private establishments. Businesses (restaurants, theaters, sports events, etc.) should have the right to determine who they serve (subject to the sometimes problematic limitations imposed by the 1964 Civil Rights Act Virtually all such businesses wisely go out of their way to reassure potential customers that they are save places to visit. This generally takes the form of mandating that their employees and customers are vaccinated for Covid. In my opinion the government, in addition to collecting and disseminating the best possible information on Covid risks and how to minimize them, should protect the freedom of businesses to make Covid policies they consider appropriate to their own business and should mandate that all of the government’s own employees be vaccinated. Only specific health issues should qualify for potential exemption. Religious and other beliefs should not.

Sports, and the Beijing Winter Olympics in particular, also raise the issue of who decides to participate in the face of serious Chinese human rights violations. I generally think that sporting competitions should not be influenced by politics. So, should athletes participate in the upcoming winter Olympics and who should decide?

In his December 9 column in the Washington Post Josh Rogin makes a strong case for each of us to speak out against violations of our principles: “Enes Kanter Freedom takes bold stance on China” “’We must always take sides,’ Holocaust survivor Elie Wiesel said while accepting the Nobel Peace Prize in 1986. ‘Neutrality helps the oppressor, never the victim. Silence encourages the tormentor, never the tormented. Sometimes we must interfere.’”

President Biden recently declared a diplomatic boycott of the China games, meaning that the U.S. government will have no representatives there, though the American Olympic teams and individual athletes are free to make their own decisions. The Economist reported that “France will not join the partial boycott that America, Australia, Britain and Canada are calling against the Beijing Winter Olympics in protest at China’s treatment of its Uyghur minority and of Peng Shuai, a tennis star. President Emmanuel Macron complained that the Anglophone countries’ merely withholding diplomatic representation—while their athletes compete—is not an effective way to alter China’s objectionable policies.” “The Economist Morning Brief”

“Sen. Josh Hawley, R-Mo., [also] ridiculed the Biden move, echoing Hagerty’s claim that the diplomatic boycott did not go far enough.  ‘A diplomatic boycott of the Beijing Olympics is a joke,’ Hawley told the Daily Caller Monday. ‘China doesn’t care if Biden and his team show up. They want our athletes.’”  In short, Hawley wants a presidential mandate forbidding participation of American athletes in the Beijing Winter games. “Republicans blast Biden apos diplomatic”

On the other hand, Sen. Hawley opposes President Biden’s proposed mandate that every eligible person must receive an approved Covid-19 vaccination.  “Senator Hawley-Biden vaccine mandate shows contempt for religious liberty”  In this area the good Senator puts “choice” over “life.”  With regard to abortion Senator Hawley sides with “life” over “choice.”

“U.S. Senator Josh Hawley (R-Mo.) issued a statement in support of Missourians who traveled to Washington, D.C., today to participate in the 46th Annual March for Life. The group of nearly 3,000 Missourians represented all ages, from high schoolers to retirees and came from all over the state including Cape Girardeau, Jefferson City, Kansas City, Sedalia and St. Louis.

“’It’s incredible to see people of all ages and backgrounds, from Missouri and across the country, who have made the trek to our nation’s capital to speak their hearts, their minds, their faith – to tell their elected leaders that this nation was founded on the dignity of every person and that every life is worth fighting for,’ said Senator Hawley. ‘I am proud to stand for the right to life. Always.’”

“Senator Hawley commends missourians participating in march for life”

Where is Senator Hawley coming from and where is he going?  Regarding health and vaccination against Covid-19, Hawley is “pro choice” rather than “pro life.” Regarding the abortion of non-viable fetuses, Hawley is pro (potential) life rather than pro choice.  What are the principles guiding when he is one and when he is the other (beyond political expediency)? When should government mandate our choices and when not?

Our Right to be Free

Our country was founded and has prospered on the proposition “that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.” We jealously guard our individual liberty. We are free to decide what we want to do and how we want to do it. This liberty is subject to two major conditions: we must live with the consequences of our choices and actions, and our actions cannot interfere with the same exercise of freedom by others. We never fully live up to these high principles, but they do define the goals we continue to and should continue to aim for.

When our actions or circumstance fail to sustain us, we do step in to help those in distress, whether from family obligations or friendships or a government administered social safety net. We continue to debate and refine its features.

Determining the boundary between those actions I am free to choose, and those that unacceptably affect others is not always easy. Walking in public naked is not acceptable in most societies (except at designated nude beaches). While this would not infringe on the freedom of others to behave as they want, it would “force” them to see something they do not want to see.

I chose this example because it does not fall neatly into something purely private that I have a right to do (walking around my home naked) or something clearly and obviously damaging to others that I do not have a right to do (driving my car through my neighbor’s garden).  In the realm of social norms, I can walk in public dressed in many ways depending on the society I am in.  A man might freely walk around in a dress (if he chooses the neighborhood carefully) without getting knocked down in some societies but not in others. Such social norms are important in defining and guiding acceptable public behavior and they vary across societies and over time. Such norms are continuously debated.

But clearly my freedom to swing my fist ends where your face begins. If you are infected with a contagious disease, you do not have the freedom to walk around potentially infecting others even in the most libertarian of societies (e.g., lower Manhattan). I assume that anyone sick with Covid-19 knows that she must isolate/quarantine herself.

But what about someone who doesn’t feel sick but hasn’t been vaccinated?

Any establishment has the right to require that only vaccinated people work or shop there and/or wear face masks. And I certainly have the right to attend only those performances or eat in those restaurants that impose these requirements. These are implications of freedom.

Surely everyone understands and accepts these propositions.  So why is there such controversy over wearing masks and getting vaccinated? I don’t know the answer to this question but will suggest a few factors that I think are important. That such health issues have become so politicized is almost more distressing than the fact that in the United States 728,000 people have died from Covid-19 by October 10, 2021.

One reason is that some people are pushing back on being told what to do by the government. Such behavior is common in freedom loving children but rather unseemly in adults. Another is that vaccines were developed with miraculous speed and their effectiveness and potential side effects are not yet fully known. None the less the evidence is overwhelming that being vaccinated significantly increases your prospects of living and surviving the infection compared to those who are unvaccinated. Another is that during the Trump administration medical policy and advice became quite politicized. Many of us, often with good reason, stopped trusting the messages from the CDC and FDA. And to this day government messaging remains poor. Rather than offering advice based on the most recent evidence (which can change over time) and the reasons for those recommendations, government pronouncements are often confusing and sometimes sound like demands. Many of us have lost trust in the government’s pronouncements. Unfortunately, some people have put their trust in unreliable sources of information and even, in some cases, in deliberately malicious sources (and we can’t always blame Russia). 

Where our choices and actions affect only ourselves, we should be free to do as we like and benefit (or suffer) from the outcome. Where our actions affect others, more or less directly, social norms and government rules should limit our choices. In societies where its citizens live by the golden rule and respect these norms, beneficial behavior is followed voluntarily — enforcement is not a serious problem.  We must determine the sources of information that we trust carefully and based on such information we must treat our neighbors with the respect we expect from them.

Protecting our freedom is critical but it is not enough. We must also exercise it virtuously. The “fusion” of freedom and virtue has been (most of the time) the basis of American success. We seem at risk of losing both. Get vaccinated now for everyone’s benefit. Please.

Eviction Moratorium

Many people who lost their jobs because of Covid are not able to pay their rent until they return to work. What should we do about it?  Most landlords will work out an arrangement for deferred rent with tenants that are otherwise trustworthy. Most overdue debts are handled this way. But a case can be made, and has been made, for temporary government assist. Where you think the money should come from to bridge the income gap tells a lot about your general attitudes toward our market economy. When renters lose their incomes and stop paying their rent, they are passing on part of that loss to their landlords.  

But landlords are people with financial needs as well.  As noted by George Will: “As of June, landlords were owed $27.5 billion in unpaid rents. Almost half of landlords, who include many minorities, own only one or two rental units. They continue paying mortgages, property taxes, insurance and utilities while the CDC requires them to house nonpaying people or risk jail. Landlords can plausibly argue that the moratorium is a “taking.”  https://www.washingtonpost.com/opinions/2021/08/04/eviction-moratorium-exacerbated-americas-institutional-disarray/

The income supplement to out of work renters can come from the general taxpayers (us) or from landlords.  Investing in real estate is one of the primary ways in which lower middle-income families build wealth and move up the ladder. They should not be the ones to bear the cost of this assistance.  The CARES Act and subsequent programs was meant to share this burden more fairly, but its disbursements seem to have been slow.  The eviction moratorium, in addition to being illegal, is immoral.

Vaccine Passports

Discussions of the pros and cons of mandated lock downs to stop (or slow) the spread of Covid-19 often miss the most important point. The key factor in restraining the spread of a contagious disease (beyond vaccines, basic public health measures, etc.) is the behavior of each one of us. Given our respective risk preferences the question is whether we adjust our behavior sensibly to protect ourselves and others from infection? Our behavior may be responding to government mandates to close restaurants, theaters, and factories or it may be responding to information provided by public health experts on the nature of the risks and measures to mitigate them. In the latter case our experience and that of our neighbors will depend importantly on the quality of the information provided and our trust in its efficacy. Our individual choices allow responses that are more suited to the individual situation of each actor.  “The unnecessary fight over covid-19”

In short, if governments were to say, “do whatever you want, but these are the risks as we understand them,” people would not necessarily rush to the concert hall, or baseball game, or hop on a plane. “Sports fans live attendance poll”  Offices, factories, restaurants and entertainment venues must convince their workers and customers that they have taken reasonable steps to be safe from Covid-19 (or other risks). Thus, comparing the results (infections and economic output) of lock down with no (or mild) lock down countries is not the right test.

We need to focus attention on the quality of the information being provided to the public, the public’s trust of such information, and the efficacy of the measures being taken by those offering reasons to gather in public places to enhance its safety. Those who have had Covid-19 or who have been vaccinated for it face minimum risk of catching it (again) or of spreading it and can pretty safely attend public events. Thus, a trustworthy way of establishing that fact would be very useful. I carry my vaccine certificate wherever I go but they are relatively easy to counterfeit if it became useful to do so. Thus, the reason behind the various projects to develop so called vaccine passports (better named vaccine certificates) is obvious.

The technical design, including privacy protections, raise more issues than you might at first imagine, including establishing interoperability standards and access to public records. However, the position taken by Florida Gov. Ron DeSantis defies understanding by those of us who place our individual freedom in first place. He stated that: “We are not supporting doing any vaccine passports in the state of Florida…. It’s completely unacceptable for either the government or the private sector to impose upon you the requirement that you show proof of vaccine to just simply be able to participate in normal society.”  “Biden vaccine passports-DeSantis”  This is incredibly wrong. Restaurants now serving indoors already test our temperature before allowing us to enter. I visited my credit union in the IMF building in downtown Washington, DC today and they took my temperature as well. If gatherings are not convincingly safe, sensible people won’t attend. Countries requiring arriving passengers from other countries with a high incidence of Covid-19 infections to quarantine for two weeks would presumably wave that requirement for passengers with a credible vaccine certificate.

It is hard to imagine that the public accommodation clause of the Civil Rights Act of 1964 would require a restaurant to admit and serve a customer with a contagious disease. But there are privacy and other technical concerns with implementing a reliable certificate of a covid vaccine. “The next front in the pandemic culture wars vaccine passports” The benefits to the economy and our freedoms are significant enough to make the effort to overcome them.

Should you get vaccinated for Covid-19?

“A CBS/YouGov poll released this weekend found 33 percent of GOP voters say they will not get the vaccine when it’s available to them. Another 20 percent say they aren’t sure.” “The-daily-202”  After being thoroughly satisfied that Moderna was safe and effective, I have received both of my jabs. But I sympathize with those who are skeptical and/or distrusting of the information they have been fed over the last year. The messaging from the Trump administration was inconsistent and the CDC has now removed some earlier postings that had been more influenced by politics than by science (which, by the way, is far from having all of the answers yet).

In addition to poor messaging from the government, some badly misguided, if not deliberately evil, groups have spread false information.  So, I find it very encouraging that many of those refusing to get the vaccine say that they “want to be educated not indoctrinated.  The responses of focus group participants suggest they can be persuaded — but perhaps not by politicians, including the former president…. Be honest that scientists don’t have all the answers. Tout the number of people who got the vaccines in trials. And don’t show pro-vaccine ads with politicians — not even ones with Donald Trump.  That’s what a focus group of vaccine-hesitant Trump voters insisted to politicians and pollsters this weekend….

 “’These people represent 30 million Americans. And without these people, you’re not getting herd immunity,’ said Frank Luntz, the longtime GOPpollster who convened Saturday’s focus group over Zoom.” Unfortunately Mr. Luntz is speaking nonsense as well. We would still get herd immunity even without a vaccine as people would acquire immunity as a result of being infected. The process would be slower with more deaths, but we would get there. I am sure that Mr. Luntz meant well.

Participants in these focus groups “all believed the coronavirus threat was real, with many having contracted it themselves or aware of critically ill friends and family, and they didn’t want to be condemned as “anti-vaxxers” who opposed all vaccines. Instead, they blamed their hesitation on factors like the unknown long-term effects of new vaccines, even though scientists have stressed their confidence in the products. They also accused politicians and government scientists of repeatedly misleading them this past year….

“For instance, [House Minority Leader Kevin] McCarthy said he understood the Trump voters’ hesitation because pharmaceutical companies waited until after Trump lost the election to announce their promising vaccine results — a comment that sparked participants to share their own resentments.

‘It was political stunts like that that leave doubt in our minds,’ said a man identified as David from Texas.”

In another session “a man called Chad from Minnesota,… praised [former head of the CDC Dr.] Frieden for acknowledging that the long-term risks of the vaccines aren’t yet known. “He’s just honest with us and telling us, nothing is 100 percent here, people.”

The lessons are clear. The best results are obtained by treating the public like adults. The government needs to honestly present the best information available, acknowledging what is known and what is uncertain.

“’I’ve been thinking the messaging was going to be very different for communities of color, for Democrats, for Republicans,’ said Natalie Davis, co-founder of United States of Care, a public health advocacy group working on vaccine outreach with organizations like the de Beaumont Foundation and Kaiser Family Foundation. ‘But it feels like it comes down to the basics that are shared across populations. People want full, accurate information so they can decide if this is the right thing for them and their loved ones….’

“‘The vaccines were approved quickly in part because red tape was cut, not corners,’ [Dr. Frieden said. ‘And almost all the doctors who are offered the vaccine get it.’”   “Vaccine hesitant republicans focus group”

The unnecessary fight over Covid-19

We American’s expect to be able to make our own choices about what risks we are willing to take. The limits on our behavior generally concern when it threatens to harm others. When state after state issued stay at home orders and mandated the closing of many businesses (restaurants and theaters, etc.) a year ago they violated this principle. Many people rebelled at this intrusion into their prerogatives, but sadly by often making foolish decisions of their own. Of course, those who contract a contagious disease, such as Covid-19, should be legally quarantined.  Otherwise, businesses and individuals should make their own decisions about how to respond to this pandemic on the basis of the best possible information about its risks and how to mitigate them. A role in which the government failed miserably.

As with economic decisions more generally, countries that give maximum scope to individuals about what to produce and/or buy have been far more prosperous than those in which more decisions are made centrally and imposed from the top (socialism). Among other things the CARES Act suspended debt payments (and associated defaults, bankruptcies, and evictions) for understandable reasons https://wcoats.blog/2020/04/11/econ-202-cares-act-who-pays-for-it/. However, it was part and parcel of centralized mandatory decision making and inferior to individual case by case decisions by lenders and borrowers (debt restructuring) and landlords and tenants (rent forgiveness or holiday or eviction). In normal times when a debtor is unable to service its debt, for purely profit maximizing reasons lenders evaluated case by case whether to allow temporary arrears (debt restructuring) or to invoke the default provisions of the loan (bankruptcy).

Restaurants that felt they could safely open with social distancing and other safety measures that would convince their customers to return should be allowed to do so. They should be free to decide whether requiring face masks when entering and walking about the restaurant would attract more customers than not doing so. Customers who were not comfortable in a restaurant that did not take these safety measure would not patronize them. The relevant government should decide whether to require them on public transportation, etc.  If you come to my house, be sure that you are wearing one.

The culture war we now witness over face masks and other aspects of appropriate public behavior with regard to Covid-19 was so unnecessary. The American government behaved like a parent dealing with children and many Americans responded by behaving like children. They didn’t choose not to wear face masks because they were convinced by medical data that they are not effective (most data shows that they are very effective). Rather they chose not to wear them because the government told them they must. Childish indeed. Almost a year ago I wrote that the government’s most effective role was to provide the best information available (and more was coming available every week) about the nature and risks of Covid-19 and how best to avoid or mitigate those risks. If restaurants felt that they could safely remain open, they would need to convince potential customers that they had taken measures to protect them from exposure to the virus. This was not the approach taken by the government and public trust in the statements of the government in recent years has been, to say the least, low.

I expressed these views almost exactly a year ago (March 31, 2020). I repeat that blog here:

https://wcoats.blog/2020/03/31/beating-covid-19-compulsion-or-persuasion-and-guidance/

The New Covid-19 Support Bill

The New Covid-19 assistance bill could add an additional 1.9 trillion dollars to support the fight against Covid-19.  In discussing the 2 trillion dollar CARES Act last April I wrote that: “The idea is that as the government has requested/mandated non-essential workers to stay home, and non-essential companies (restaurants, theaters, bars, hotels, etc.) have chosen to close temporarily or have been forced to by risk averse customers or government mandates, the government has an obligation to compensate them for their lost income. Above and beyond the requirements of fairness, such financial assistance should help prevent permanent damage to the economy from something that is meant to be a temporary interruption in its operation.”  “Econ 202-CARES Act-who pays for it?”  While I referred to the shutdowns as the result of “risk averse customers or government mandates”, it seems that the “blame” lies with sensibly risk-averse customers who stayed home and/or out of public gathering places by their own choice before the government required it. “Lockdowns-job losses”  A key point was that this was not a stimulus bill as output/income fell because its supply fell, not for lack of demand to buy it by consumers.

As total and partial shutdowns will continue for a few more months (or permanently for some unlucky firms) such support (properly targeted) should be continued for a while longer. But at what level and for how long? As I stressed in my April blog, the CARES Act payments to unemployed workers did not create income but rather transferred it out of a diminished pie from those who still had incomes (and could buy the government bonds that raised the money being transferred).  As I noted then and as is increasingly important now, the increased fiscal and monetary support that accompanied these government expenditures will need to be unwound carefully as the economy recovers. Equally important, the further increases in debt and money created by the currently proposed support should not exceed what is “truly” needed. U.S. national debt is already almost 28 trillion dollars, over 130% of GDP.

While CARES Act type support was needed and helpful, it was not always appropriately targeted. It is not the kind of emergency spending that is easy to get fully right.  As time goes on more and more evidence will be collected of abusive uses of these funds. Rather than choosing specific firms and classes of individuals to receive support, implementation of a Guaranteed Basic Income for everyone irrespective of income and situation would provide a better safety net for all situations. “Our social safety net”

In December President Trump signed a $900 billion Covid relief bill providing “a temporary $300 per week supplemental jobless benefit and a $600 direct stimulus payment to most Americans, along with a new round of subsidies for hard-hit businesses, restaurants and theaters and money for schools, health care providers and renters facing eviction.”

President Biden has proposed a new additional $1.9 trillion dollar package. Added to the $900 billion approved in December, this would be 13% of GDP, a VERY large amount.  Ten Republicans have proposed a narrower package of $618 trillion. They would exclude measure not directly relevant to the impact of the pandemic such as raising the minimum wage to $15 per hour (a measure that would be damaging to inexperienced, new job entrance). The Congressional Budget Office has just “estimated that raising the minimum wage to $15 an hour would cost 1.4 million jobs by 2025 and increase the deficit by $54 billion over ten years.” “Minimum wage hike to $15 an hour by 2025 would result 14 million unemployed”

The Democrats’ package would provide $1,400 per person direct cash payments across the board in addition to the $600 provided by the December bill. The Republican proposal would lower the thresholds for receiving assistance to individuals making $50,000 or $100,000 for couples and would provide checks of $1,000 per person.  They were expecting to negotiate a compromise package, which now, unfortunately, seems unlikely, though as this is written discussions continue. There are many individual provisions in the proposed bill. I have not reviewed them. My focus here is on the overall financial size of the proposal.

In an interesting oped in the Washington Post, Larry Summers, former Secretary of the Treasury during the Clinton administration, gently warned that the democrats’ package was excessive and risked rekindling inflation.  He wrote that:

“A comparison of the 2009 stimulus and what is now being proposed is instructive. In 2009, the gap between actual and estimated potential output was about $80 billion a month and increasing. The 2009 stimulus measures provided an incremental $30 billion to $40 billion a month during 2009 — an amount equal to about half the output shortfall.

“In contrast, recent Congressional Budget Office estimates suggest that with the already enacted $900 billion package — but without any new stimulus — the gap between actual and potential output will decline from about $50 billion a month at the beginning of the year to $20 billion a month at its end. The proposed stimulus will total in the neighborhood of $150 billion a month, even before consideration of any follow-on measures. That is at least three times the size of the output shortfall.

“In other words, whereas the Obama stimulus was about half as large as the output shortfall, the proposed Biden stimulus is three times as large as the projected shortfall. Relative to the size of the gap being addressed, it is six times as large….  [Given] the difficulties in mobilizing congressional support for tax increases or spending cuts, there is the risk of inflation expectations rising sharply.” “Larry Summers-Biden-covid stimulus”

The U.S. national debt was $22.7 trillion at the end of 2019 and skyrocketed to $26.9 trillion at the end of 2020. On February 7 it stood at $27.88 trillion or $84,198 per person and $222,191 per taxpayer. This is 130.8% of GDP. This is a very big number. Much of this debt has been purchased by the Federal Reserve resulting in an explosion of its balance sheet and the public’s holdings of money. At the end of 2019 the Federal Reserve assets (the counterpart of which is largely base money–currency held by the public and bank deposits with the Federal Reserve) $4.17 trillion and grew to $7.36 trillion by the end of 2020. In other words, the Federal Reserve bought $3.19 trillion of the $4.2 trillion increase in the national debt. This is a bit of an overstatement because the Fed also bought a modest amount of other debt.  Much of the rest was purchased by foreigners as “the U.S. trade deficit rose 17.7% to $678.7 billion and hit the highest level since 2008.” “The US trade deficit rose in 2020 to a 12 year high”

Because the Federal Reserve now pays banks interest to keep large amounts of their deposits with the Fed in excess of required amounts (excess reserves), the money supply measured as currency in circulation and demand deposits with banks (M1) grew somewhat less than the Fed’s purchases of US debt. In 2020 M1 grew $2.5 trillion, a year in which GDP ended a bit lower than it started.` In part, the public is not spending this money at the rates they normally would because the theaters and restaurants, etc. are closed. A seriously inflated stock market and cryptocurrency values seem to be temporary beneficiaries.

According to Wells Fargo: “We estimate consumers are sitting on $1.5 trillion in excess savings compared to the saving rate’s pre-COVID trend….  After a year of limiting trips, eating at home and putting off doctor appointments, we expect consumers will be eager to engage in many of the in-person services forgone during the pandemic, and spend on gas to get there and clothes to look good doing it. The ample means and eagerness to spend could potentially set off a bout of demand-driven inflation that has not been experienced in decades.”  “Wells Fargo–Poking the Inflation Bear”

As I noted last April, unwinding these monetary and fiscal injections, as is necessary to avoid a significant increase in inflation, will be challenging. And now we are even deeper into debt. As inflation increases nominal interest rates will increase as well and the cost of our huge debt financing with it. While managing the short run impact of the pandemic, the government’s eyes should be on the longer run picture as well.

Access to COVID-19 vaccines

In less than one year from learning of this virus, we now have two approved safe and effective covid-19 vaccines with at least one more on the way. Millions of doses have already been produced. This is a near miracle. Thank you pharmaceutical industry and the governments (and their tax payers) that are paying for it.

Getting the vaccine into our bodies is quite another thing. This has several elements. The first is distributing the vaccines to each state/county and site of vaccinations. The second (or first and a half) is staffing these sites with professions able to administer the shots with the necessary equipment (refrigeration, syringes and needles, etc.). The third is determining who can receive the shot this week and getting them to the right place. The need for these three elements has been known for as long as the need for a vaccine has been known. And officials have known the likely vaccines for at least half a year. But planning for delivering the vaccine to your arm (or the lack of it) has been totally botched.

Focusing on the United States, the federal government promised to vaccinate 20 million people by the end of the year (last week). “Of the more than 12 million doses of vaccines from Moderna Inc. and Pfizer Inc. with BioNTech SE that have been shipped, only 2.8 million have been administered, according to federal figures….  The federal government is sending vaccines to states based on their populations, and it has provided guidelines, but no rules, about how they should be distributed…. On Friday [Jan 1, 2021], Sen. Mitt Romney (R., Utah) criticized the vaccine rollout, saying in a statement that the lack of a comprehensive federal plan to be shared with states “is as incomprehensible as it is inexcusable.”  WSJ: Covid-19-vaccines-slow-rollout-could-portend-more-problems”

Priority

Beyond the above fiasco, it is necessary to determine the priority for receiving the shots and communicating that information to you and me.  As we have already seen it will take a while–many months–to vaccinate everyone even without the above mess. So, who should get them the first month and the second month etc.? I discussed this issue last May. https://wcoats.blog/2020/05/18/the-vaccine-who-gets-it-first/

One criterion for establishing inoculation priorities is to allocate the vaccines so as to maximize the lives saved. I suggest that a better criterion is to maximize the life saved. The difference between the number of lives saved and the amount of life saved can be explained with a simple example. If there is only one dose and it is given to an 85 year old woman otherwise in good health, she might live another healthy year. If given to a 40 year old nurse, he might live another 46 healthy years. In both cases only one life has been saved but in the second case much more life has been saved (46 years of life rather than only one). But this potentially understates the case for giving the jab (as the British call it) to the nurse. One nurse that has been immunized against covid-19 can safely treat more patients that have covid-19 thus saving even more lives and more life. An argument in the other direction of inoculating the elderly first is to flatten the curve (i.e., reduce the inflow of covid-19 patients into overflowing hospitals).

In my view there is a strong case for maximizing the life saved rather than the number of lives saved. We older people should not crowed out younger people who as a result of the vaccination might enjoy much longer lives, something we have already enjoyed. The case, in my view, is overwhelming for critical workers (healthcare workers, grocery store workers, delivery people, etc.) of all ages to receive priority. “Many states are following CDC guidelines to start with front-line medical workers and people in long-term care facilities, but not all. Florida Gov. Ron DeSantis on Dec. 23 extended eligibility to people aged 65 and older.  Because each county and hospital in the state implemented its own approach, many people didn’t know whether to call, log on or show up in person to secure a spot.” [Same WSJ article] 

 A single dose of Moderna and Pfizer’s vaccines “appears to provide strong protection against the coronavirus…. With supplies of the vaccines limited — and hundreds of millions of people waiting for inoculation — this leaves epidemiologists grappling with a complicated question. Should the nation vaccinate fewer people with the best protection possible, or provide twice the number of people with a single shot, covering more of the population but with slightly weaker protection?”  “Coronavirus-vaccine-single-dose-debate”

But if the government can get itself organized (I know that that asks a lot) the existing and rapidly expanding supply of vaccines can be administered in a relatively modest number of months after which the priority issue vanishes.

Information

Whatever your priority turns out to be, how do you know where and when to show up? Do you need a prescription or approval and if so where do you get it? My insurance company is sending regular updates on what I should do. My Maryland county (Montgomery) website has information on the priority phase they are in (phase 1 at the moment) and that is about all (probably because every dispensary–hospitals, doctor’s offices, CVS–sets its own rules). I plan to contact my Primary Care Physician (PCP) for instructions next month when the situation might be a bit clearer.  What should people without medical insurance or a PCP do?  I have visited Kenya many times with the IMF and suspect that they are doing a better job with this than we are. How and why is this such a mess?