The economic devastation of the pandemic could kill more people than the virus
latimes.com
latimes.com
As pretty much every data point shows, in the US, the drastic drop off of economic activity happened well before the actual lockdowns. States saw drops in economic activity in the days leading to lockdowns that was 80-90% as much as the drop that happened during the lockdown.
So the trade off wasn’t COVID deaths and a better economy, vs fewer COVID deaths and a worse economy. The trade off was a lot of COVID deaths, potentially triggering devastating cliffs, and a terrible economy, or fewer COVID deaths, and a slightly more terrible economy.
An epidemic raging throughout the country doesn't.
The economic problem is only a problem if the political leadership decides to do nothing at all.
Claiming that there is a simple political solution to the current global economic situation is beyond disingenuous.
We can enact policies to prevent people from dying due to a lack of basic resources, however.
Unfortunately, contrary to what many seem to believe, this isn't a case of choosing between two evils. It's not as if we can avoid economic consequences by simply ignoring the virus. Business as usual won't exist, with or without mandated lockdowns, until the threat of the virus has passed. Neither can we simply defeat the virus by shutting down all economic activity, even if that were possible. The solution to this crisis will likely require a combination of luck, technological progress, and well-executed policy.
That said, I'll reiterate that keeping people from dying due to "economic devastation" is very much within our present capabilities and doesn't depend on global economic recovery. Of course, that doesn't mean that we'll (well, those in a position to choose, anyway) make the choice to do so.
We can prevent some of them from dying by using what control of the virus we DO have.
>We can enact policies to prevent people from dying due to a lack of basic resources, however.
We "can" in the sense that it's technically possible. The present government is probably not capable of doing this, however - they're too entrenched in their status quo and unable to deal with the possibility of things changing. They want to believe that whatever happens with the virus is only a temporary crisis before they go back to "the way things were".
While I don’t expect the present US gov’t to effectively act to mitigate the virus’ economic consequences for those most vulnerable, that reflects a political choice, not limited capability.
Very true, but the most likely outcome is that people will not exercise their power to reduce the hardship in the third world. Most people of means did not bother to end starvation in the 3rd world before this, why would they be more likely when they are in worse economic position. How much have you personally donated to end starvation before this? If you haven't, what made you make the choice not to?
I think it's about how people think of their rights. If somebody has a right to something, they can't receive it as a gift. It is theirs, no matter who holds it. If it isn't a right, then it can always be legally withheld. Charity celebrates the gift-giving side of the equation, but it conceals the darker side: that charity doesn't make sense if it isn't backed up by people taking property rights more seriously than basic needs. If basic needs are protected by law, it's not a charitable donation, it's a tax.
One side insists that the only rational policy is for approximately 100% of the funds to be used to prevent business failures, arguing that "1) citizens need businesses to employ them so they can earn the monies they need to avoid starvation and homelessness with enough leftover (or at least a line of credit) for consumer consumption to collectively drive 70% of the economy; 2) the economy is literally made out of businesses and if too many die, then by definition so will economy; and 3) failed businesses take longer and are more costly (in capital investments) to repair/replace than are the jobs/homes/lives of the employees that must be sacrificed to save the company.
"On the contrary!", says the almost-equally-sized other half of the legislature, "Approx 100% of the funds to be distributed directly to citizens, $6000 each, thus 'cutting out the the middleman employers' and maximizing the number of citizens saved from homelessness and starvation due to unemployment. THIS is the optimal policy, both economically AND morally!"
To break the deadlock, Congress selects YOU as stimulus policy czar: your job is to decide and justify how best to distribute the stimulus funds - primarily distributed to businesses, primarily distributed directly to citizens, or some compromise between?
Then the narrative was always "Cyclical recessions happen - deal with it." Followed by "And how about some tax cuts?"
Beyond that, your question is a solved problem. The answer is called Keynesianism, also known as the New Deal.
Handing out money for nothing is clearly madness. But there is a lot of work that needs to be done, and isn't being done - including affordable health care, infrastructure repair and expansion, more diverse food supplies and farming, education at all levels, and so on.
None of this will happen with the current incumbent, but countries that don't make the leap from a greed economy to a need economy are very likely to end up as failed states within ten years at the outside, economically and politically.
Because that worked out so well. Aren't there more and more economists saying that the New Deal made the Great Depression longer?
https://www.wsj.com/articles/SB123353276749137485
https://fee.org/articles/fdrs-folly-how-roosevelt-and-his-ne...
https://www.nas.org/blogs/article/ask_a_scholar_did_the_new_...
(I basically googled "did the new deal extend the great depression" to find these)
Now, you could say that these are all "conservative" sources, and thus invalid. (Of course, you'd then have to throw out support for the New Deal from "progressive" sources, which might also be painful) But either way, it does show that "The New Deal didn't help" is a position held by people.
Whaples, Robert (March 1995). "Where Is There Consensus Among American Economic Historians? The Results of a Survey on Forty Propositions" (PDF). The Journal of Economic History. Cambridge University Press. 55 (1): 142–151. CiteSeerX 10.1.1.482.4975. doi:10.1017/S0022050700040602. JSTOR 2123771.
Also, if the stimulus in the scenario was $4 trillion total, each citizen could be given/loaned ~$12000; by pooling their stimuli payments, tens of individuals and/or large families could potentially have enough capital to take a risky shot on a startup / small biz.
I highly doubt startups would form around families just due to people getting one time large payments like 12k. If you have a family of 10 you’re going through 120k plenty quickly with just food, shelter, and other necessities. So much so that the money would have a huge multiplier effect at sustaining local demand for essential goods and services.
When times are back to normal, actually raise interest rates so we aren't so pathetically overleveraged. And if need be, change the customary decimal separator to a comma and add a digit for mills to make the finance bros happy.
Businesses would generally be wiped out, and your mom-and-pop outfits that worked their entire lives to build something would be on the dole like the rest of us. With the private economy gone, the government could run "essential" industries. It could probably do an okay job of allocating talent, I guess.
It's kind of like turning a firehose on an overheating server rack. It might work...
When you give peons like us $10K, you don't get any of it back, except in taxes.
I'm not that knowledgeable on the subject, but I do know that when given a choice between keeping your seed corn dry and eating it, you need to think very hard about what you're doing.
Where do you think it goes exactly?
This might help explain our disconnect: https://en.wikipedia.org/wiki/Velocity_of_money
A better analogy would be if the government decided to "give" $90K to each homeowner in return for a $90K share in their home equity (valued according to some plausible marking). That's very different than simply giving them $90K with no strings attached. Certainly something is being given, but it's not worth anything like $90K.
Will it? Or will it just push it out over time? Or something else completely? Can you say with certainty that more people won't die of despair if we give people money? Does it depend on doing something a certain way? Are there some ways of doing things better than others? How much depends on the effectiveness policymakers (politicians) versus implementors (bureaucrats)?
I don't think we can say for certain "doing nothing" is categorically worse than "doing something".
Maybe the point isn't to generate a financial return or increase the efficiency of the "engine." Maybe the point is simply to prevent hypothetical deaths resulting from "economic devastation." Maybe the car engine just needs enough gas to make it to the next gas station, not extensive re-engineering.
> Just needs enough gas for the next station
You don't prevent economic devastation by feeding a broken system all the resources, you prevent it by fixing the broken system.
Edit: here's an example. I joined new work and their documentation was a complete mess. I could have saved time immediately and stuck to their busted structure, just shoving documents wherever similar documents existed, but instead I overhauled the entire structure and content, saving everyone time in the long run.
Guess which option works better.
My point was simply that we have more than enough resources, even at our worst, to keep people's basic needs met. I'm not saying that keeping people alive will prevent economic devastation, just that preventing economic devastation is not a necessary precondition for keeping people alive.
Are the hospitals not treating people in immediate threat of dying? Is California not housing the homeless in hotels? Is there not an extensive support network?
I don't think this virus and "short term" work together.
> My point was simply that we have more than enough resources
Who is "we" in this case? Because the State of California is in massive debt as far as I can tell, and they're still drowning in problems.
If you give everyone money, but people aren't working, aren't producing anything, then your country is just as poor as before.
The economic backbone of a country is not money, it's work. So giving money in bulk does not replace work. (You can do it targeted, for small sections of the population, but you can't do it for everyone.)
Hence the point of helicopter money is exactly that - to ensure that those who are unable to work (and have no other source of income) do not carry a disproportionate burden through this situation.
EDIT: Furthermore - if you give someone who is broke $1200, they will likely go out and spend it on food and essentials - hence significant (for them) resources are allocated towards them. If you gave the same to a multi-millionaire, the chances are that it would have zero effect on their consumption. Likely it would end up in their bank account (if they could be bothered to cash it) - where it would contribute to the slight erosion of the value of money.
A fine point here - it's only fair if the profit in non pandemic circumstances is also distributed evenly, which isn't the case.
The backbone of a country is its people. If everyone starves to death, there is no more country. Giving money in bulk is to paper over the cracks in the system. For most of us on here, we're lucky enough to have transitioned to working remotely, and have enough savings to live off of for some time so as to not worry about rent or mortgage payment. Food insecurity isn't a thing to contend with, outside of fraught trips to the supermarket.
Others have no such luck, and missing even a single paycheck, or single digit hours out of one, upsets the delicate balance that is the payday loan repayment house of cards. Except that four out of five Americans live paycheck to paycheck[0], so it's most Americans that have no such luck.
Those Americans will go broke, hungry, and would be borderline homeless. Giving money is to alleviate those conditions. People aren't working because we're telling them not to. Ergo, giving money in bulk. Not to replace work, but to supplant it when it isn't an option.
There are those that want to replace work with bulk money transfers, but you don't have to buy into the idea of UBI to recognize that giving people money so they don't starve is better than the alternative.
[0] https://www.forbes.com/sites/zackfriedman/2019/01/11/live-pa...
The money will be used to buy food - if there is any. The food can be eaten - if there is any.
We need the people who are close to the edge to not fall off because they miss some work. We really do. But we also need the economy to continue to function to produce things like food. That's ars's point and, despite your snark, it is also a valid one.
Ars makes the leap that giving everyone money means they won't produce anything, and uses that to prove that giving bulk money won't work. Competent managers realize that money only goes so far, and there are things other than money that employees (also) value.
Yes we need the economy, but does the economy disappear if the poorest aren't having their bootstraps constantly cut off?
We need a course 1) that doesn't trample on those who are poor, laid off, and still have to eat and pay rent, but 2) that leaves as few of them laid off for as short a time as possible.
What course will do that? That's above my pay grade. I just can see two problems that we must, somehow, avoid both.
Only if we are very, very lucky.
On a typical year in the US, something of the order of five million people die. (Could be more, couldn't be much less.) A very large fraction of that is accounted for by aging and age-related illnesses.
This year many of those who would die anyway will be taken by the virus. Another notable number will be taken but might otherwise have lived one or a few years longer.
But let us ignore that and look at the numbers. Suppose it takes 200,000, which we all hope is on the high side. That's 4% of five million. Death from virus is terrible. Death from economic ills is terrible. But regular death is way, way worse than both combined.
A lot of US death happens for very preventable reasons, but Americans have chosen, or have had chosen on their behalf, to tolerate overwhelmingly more unnecessary (meaning unnecessarily early) deaths every year than the combined sum of both of those.
What are the chances that people will come out of this crisis committed to preventing all those other unnecessary deaths?
And there will be some other positive effects: decreased traffic means decreased pollution (a key cause of heart and lung disease), less traffic accidents, less stress linked to long commutes, etc. Not to mention lower spread of other diseases like the common flu due to social distancing.
I don't mean to paint it all rosy, but the issue is not as black and white as is suggested in articles like this.