As is obvious, I have stopped reporting on almost all incoming economic data, as anything older than last week is out of date. But once the last important February data is reported tomorrow, I will take one last fond look back at our pre- Coronavirus Recession economy. How close to recession was it?
I also want to write a few more detailed posts on several points. But for now, let me leave a quick note about some important issues going forward.
1. The federal government under Donald Trump is NEVER going to do what is necessary to bring this pandemic under control. Success is only going to be achieved by cooperative action by the States.
2. As I forecast, the increasing urgency of the pandemic has put the States under enormous public pressure to take more effective action. Most, especially the “blue” States and some Eastern, Midwestern, and a few Mountain West “red” States have done so. But Southern “red” States in particular continue to resist, and probably will continue to do so until it is too late – although ultimately they too will respond to pressures from their publics.
3. Now that there are essentially two regions of the country under lockdowns: (1) Northeast + upper Midwest and (2) West Coast + upper Mountain States + New Mexico + Colorado, they need to cooperate to test and quarantine incoming visitors. This will require closing down their airports, seaports, and train stations to passenger traffic, or alternatively quarantining those arrivals for 14 days. Highway checkpoints also need to be set up at the borders of the regions, with similar restrictions. This is the only way to prevent carriers of the virus from recalcitrant States from undercutting the efforts of States in lockdown.
4. There is a fair amount of support among the Young Invulnerables for a modified “let ‘er rip” scenario. The idea is to let younger people go back to work, and just lock down older people and those with heightened risk. It wouldn’t work, for two reasons: (1) about 2% of the younger population will need intensive medical intervention, and even that will outstrip the US’s ICU capacity, even without accounting for infections among the more at risk plus unrelated needs; and (2) there is no way that younger people are going to stay away from those above the age cutoff for months at a time. So the age-dated “cordon sanitaire” would leak like a sieve.
5. I do not think the federal government can continue to pass $Trillions in business stimulus indefinitely until the pandemic is brought under control. I believe that ***debt relief*** will be a far more effective and less costly method. Essentially, everybody gets a debt holiday through, say, June 30 (i.e., you don’t have to pay your mortgage, rent, or car or student loan payment). The missing payments are added on at the end of the existing term of the loan. Ultimately almost all creditors will wind up being banks, and the FDIC and the Fed, with the assistance of Congress, can step in to make sure they stay liquid and their depositors get interest payments. I need to flesh this out a lot more, but the above is the essence of the idea.