What is U.S. President Donald Trump and his administration thinking when it comes to the country’s response to the COVID-19 pandemic?
It sounds like it may be getting ready to throw in the towel on its strategy of severely limiting people’s activities in a bid to slow the progress of the disease.
At least that’s how many are interpreting the all-caps note Mr. Trump sent out on Twitter late Sunday night: “WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF,” the President said. “AT THE END OF THE 15 DAY PERIOD [of nation-wide social distancing], WE WILL MAKE A DECISION AS TO WHICH WAY WE WANT TO GO!”
WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF. AT THE END OF THE 15 DAY PERIOD, WE WILL MAKE A DECISION AS TO WHICH WAY WE WANT TO GO!
— Donald J. Trump (@realDonaldTrump) March 23, 2020
Many have read this as the President putting the nation on notice: He won’t let the juggernaut American economy be destroyed by the country’s response to the virus.
Indeed, the early steps to limit the virus’s march have come at a massive economic cost. Millions of jobs have been lost. The stock market, which only weeks ago was boasting record highs, has crashed to unthinkable levels. Trillions of dollars have been lost in economic output. People’s pension plans have suffered losses of similar overall value. And for a President whose signature achievement during his three-plus years in office was a roaring economy, this is devastating.
So it’s little surprise that Mr. Trump is pondering the trade-off between the state of the economy and the toll that COVID-19 would take on American lives if people were allowed to return to work.
White House economic adviser Larry Kudlow put the decision in stark perspective: “… We’re going to have to make some difficult trade-offs.”
According to a recent story in the Wall Street Journal, private-sector economists have warned that the crisis could cost the economy five million jobs and US$1.5-trillion in economic output. The U.S. stock market has already lost $12-trillion in value since the middle of February. And all those numbers may only get worse.
Meanwhile, the most cited study on the virus, done by Imperial College London, has estimated the United States faces a death toll of more than 2 million people if little to nothing is done to stop the spread of the disease.
That is the trade-off of which Mr. Kudlow speaks: The lives of mostly older Americans versus the economy, which, if allowed to shrivel further in a bid to beat back the virus, could affect far more Americans in other ways. At least, that’s how the argument goes. It is premised on the fact that despite a lockdown order from the state’s governor, California’s beaches were packed this weekend; it’s based on how difficult it is to imagine nearly 300 million people practicing social distancing to the degree necessary to halt the disease’s advancement. The United States, after all, is so far behind in its testing for the virus it would likely take a year to implement the kind of program necessary to combat the spread of the disease in the same way Singapore and South Korea did while while keeping their economies running. So why shouldn’t it just accept nature’s cruel verdict and return to work as best as people can?
If that’s the route the U.S. government takes – and I’m betting that in an election year with Mr. Trump in charge, it will be – then it could have a profound effect on this country.
The impact that the virus is having on Canada’s economy is no less severe, at least by scale. And Prime Minister Justin Trudeau has been upfront about the likely length of this period of social distancing, with its attendant impact on business: months. If the United States decides to put jobs ahead of the lives of the most vulnerable, it will be noted in this country too, and undoubtedly, some Canadians will believe that we should follow suit.
That is, until we start seeing and hearing about the horror stories that an economy-first approach in the United States will spawn. If the Americans back off the only known strategy for slowing the disease’s progress (along with testing), then we are likely in for some scenarios that will make what we’ve seen in Italy and Spain look tame by comparison.
Bodies will quickly pile up, with nowhere to put them. Hospitals will be overrun. There simply will not be the capacity to assist all those who will need it. It will be like something we’ve never seen before.
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We're at war and need wartime institutions to keep our economy producing what's necessary | TheHill – The Hill
There can be no question about the nation’s current predicament. We are at war. We are faced with a public health crisis, yes, but the virus now ravaging our communities is a lethal invader taking American lives, threatening our way of life and destroying our productive capacity and economic health.
We’re waging battle on the public health front with thousands of the most heroic and able health professionals on the planet, yet at the same time, it appears that despite Congress’ record $2 trillion relief bill we have no wartime strategy to get needed equipment where it is needed or to save our economy. We have no coordinated plan to mobilize workers, produce needed medical supplies, and distribute these to the facilities that need them.
We’ve faced down war on our people on our own shores before, so why not look to those occasions for clues as to how it is done? Many of the answers we’re looking for to respond to our current crisis and associated production shortfalls can be found in the measures taken by wartime presidents Franklin Roosevelt and, before him, Woodrow Wilson.
The key to keeping wartime production humming has always been public collaboration, with the public firmly in the driver’s seat, with private producers.
The U.S. took such measures when Pearl Harbor was bombed. President Roosevelt established a War Production Board (WPB) to coordinate the repurposing and expansion of factories; the re-routing of existing and opening of new distribution channels, and countless other tasks entailed by the productive and distributive ramp-up necessitated by the war. Before that, President Wilson established a War Industries Board (WIB) to achieve the same ends during the First World War mobilization.
Roosevelt’s WPB worked in tandem with Herbert Hoover’s and his Reconstruction Finance Corporation (RFC), the already-existent financing arm of the New Deal. The RFC had been patterned after Wilson’s War Finance Corporation (WFC) of the preceding era, established to work with the WIB in overseeing and funding U.S. mobilization for the First World War.
The WFC and the RFC directly financed mobilization, using a broad array of financing tools. They made direct grants, provided inexpensive credit or loan guarantees, and in many cases took equity stakes in individual businesses, thereby both recapitalizing them and taking internal governance rights to help guide production flexibly from the inside.
Given the success of this model in our most “existentially” threatening earlier wars, why not update it now as we grapple with another lethal invader?
I have been advocating, in some cases on my own and in some cases with others, a number of possible models for a contemporary RFC for some years now. The idea must be not just to address crises ad hoc after they have emerged, but to treat healthy and ongoing ‘reconstruction’ and national development proactively as an always-necessary, continuous process in need of an effective and democratically accountable coordinator. Think of it as a smart industrial policy tool for managing a permanent policy need in any world, such as ours, in which technical needs and technologies themselves constantly evolving.
A National Investment Authority (NIA), for example, which I first floated with my colleague Professor Omarova early in 2015, would develop, coordinate, and oversee the financing and execution of a coherent strategy of perpetual, across-the-board national development, in collaboration with private sector agents whose industries are implicated by particular projects.
My National Investment Council (NIC), introduced more recently, would collaborate more with already-existing federal agencies whose mandates are implicated by specific industrial and infrastructural projects, bringing them together as the Financial Stability Oversight Council (FSOC) does our multiple financial regulators. It would accordingly resemble not only the RFC but also the Board for National Investments (BNI) advocated by J.M. Keynes in the 1920s.
Either model would include a direct investment arm, which would act both in primary and in secondary to ensure both public and private sector provision of critical public goods. What makes these models especially relevant today is that they are designed to be platforms of precisely the kind that we need to survive our pandemic.
Right now, they would mobilize a coherent productive response to the COVID crisis. They would inject capital into businesses that need it, take direct equity stakes in them as necessary, and direct resources coherently toward the production of what must be produced both to keep our people healthy and our economy humming.
In recent weeks, my friends James Galbraith and Michael Lind have proposed an ad hoc Health Finance Corporation (HFC) to address the COVID crisis. Like the NIA and NIC, it is inspired by and patterned in part after the RFC. I find much to admire in this proposal, as does presidential candidate Bernie SandersBernie SandersOvernight Energy: Oil giants meet with Trump at White House | Interior extends tenure of controversial land management chief | Oil prices tick up on hopes of Russia-Saudi deal Oil giants meet at White House amid talk of buying strategic reserves The Hill’s Campaign Report: Biden struggles to stay in the spotlight MORE (I-Vt.), who has proposed his own variant of it. I think we’ll do even better, however, to institute something more permanent.
Unless we’re all killed by the present pandemic, there will be others. And just as importantly, reconstruction and development — national self-renewal — are forever.
Robert Hockett is the Edward Cornell professor of law at Cornell University, Visiting Professor of finance at Georgetown’s McDonough School of Business, and consulting counsel at Westwood Capital in New York City. Formerly with the Federal Reserve Bank of New York and the International Monetary Fund, he is a frequent advisor to legislators and regulators in Washington and New York.
Opinion: Reality check: The economic crash is significant but it's not the apocalypse – Calgary Herald
Stock markets have entered bear market territory meaning that they have lost 20 per cent of their value and in short order. Is the stock market’s reaction overstated? From an economic perspective, coronavirus is big. It started with an interruption in China’s output and if that wasn’t mainstream enough, now global travel is being interrupted, events are being cancelled and large social events are being prohibited. Meetings are being moved to virtual ones and extended breaks are being imposed on schools. This is disrupting our lives.
When the sub-prime mortgage fiasco resulted in the global financial crisis, the U.S. stock market collapsed as the Dow Jones Industrial Average index fell from a high of over 14,000 to a low of around 7,000 over a period of 18 months. There was a fear that the globe was entering a period of a global depression much like what had happened in the 1930s. That fear proved unwarranted as the global economy rebounded and the stock market resumed its upward trend. There are many reasons that the global economy was more resilient this century versus in the 1930s and the banking rules have been largely pointed to. I would posit that the degree of globalization, trade, availability of food, preservatives and energy, along with the portion of the population that is not living in abject poverty are all in the mix as to why the 2008 recession did not become a depression.
"Sledgehammer" policies will destroy us; we need open economy says Johns Hopkins professor | – Kitco NEWS
Government-mandated policies of self-isolation will cripple the American economy, and the draconian measures taken to contain the pandemic are not necessary, this according to Steve Hanke, professor of applied economics at Johns Hopkins University.
“With the economy shutting down, the cost is going to be absolutely phenomenal,” Hanke told Kitco News.
Hanke likened the response to the virus from the U.S. and many Western European nations to a “sledgehammer.”
“The sledgehammer approach being used in most European countries and the United States is turning out into a very costly mistake. And what I mean by sledgehammer is they haven’t planned anything, they just have a blanket program where we’re all locked in our condos or houses and can’t move, and the economy shuts down,” he said.
Instead, governments should take the model that Sweden has set, Hanke said.
“If you look at some place like Sweden, Sweden has a very laissez-faire, very targeted approach, and they’re doing very well. The kindergartens are still open, the grade schools are still open, most factories are still open in Sweden. They are not imposing this sledgehammer and essentially wiping out the economy,” he said.
“The places that have done well in controlling and counting properly the victims of this pandemic are countries that have small, efficient governments, and free market economies. You look at Singapore, Hong Kong, they’re right up there,” he said.
Additionally, these nations have all practiced the “five P’s”: prior preparation prevents poor performance, Hanke said.
The U.S. is now the country with the highest number of COVID-19 cases in the world, and the majority of the country has not yet been tested.
“Wherever the five P’s have not been applied, you have a disaster,” he said.
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