Contributor Post Created with Sketch. Decentralize the COVID-19 Response

 

Two tectonic forces are wreaking havoc on the American economy. On one side of the ledger, retail sales in April plummeted by 16.4% and manufacturing by 13.7%. Simultaneously, unemployment claims rose by about 20 million and have swelled to 36.5 million people overall, a number still climbing. On the other side of the ledger, state governments are grasping for solutions, making erratic decisions about how to restart the economy while reducing the spread of COVID-19.

The difficulties faced by states are compounded by a deep public divide over whether the economy should be reopened now, given the risk of a spike in new cases. The early reopening in Georgia is instructive because individual businesses have generally taken care to make the transition in sensible steps. The same seems to be true in Colorado. In Wisconsin, meanwhile, a Republican legislature backed by a conservative Supreme Court overturned a stay-at-home order imposed by Democratic Governor Tony Evers.

In the face of these disputes, House Speaker Nancy Pelosi achieved a victory of sorts when the House adopted by a 208-199 vote, with some Democrats defecting, her $3 trillion spending package. The so-called HEROES Act, short for the mouthful “Health and Economic Recovery Omnibus Emergency Solutions Act,” promises something for everyone for the duration of the crisis, including unemployment benefits, housing relief, hazard pay for frontline workers, direct payments to ordinary citizens, federal workers, and federal contracts, and modifications to Medicare and Medicaid. For Pelosi, the simple truth is that the basic needs of society cannot be put on “pause” because the economy is in a state of paralysis. But whether or not the Act passes, it will set a de facto agenda for November’s Presidential election, which could well turn into a referendum on the current COVID-19 response.

The initial point to note is that this legislation, like all other stop-gap measures to stabilize the economy, is a second-best solution. Let us assume that everyone accepted Pelosi’s legislative priorities of “opening our economy safely and soon, honoring our heroes, and then putting much-needed money in the pockets of Americans.” That still leaves the question of the means to those ends—of whether this program fits the stated goal. The bill does nothing to further the first of these objectives, and implements a wide set of wealth-transfers to achieve the last two, without any indication of how and when the tab will be paid. Unfortunately, both political parties seem to have turned a blind eye to the long-term risks of deficit spending.

The first of many difficulties with the HEROES Act is whether it is warranted at all, given the earlier legislative responses to COVID-19, including the CARES Act (another glib acronym: the Coronavirus Aid, Relief, and Economic Security Act) that has already pumped over $2 trillion of relief into the country. In both cases, the legislative relief covers only a small fraction of the total economic loss caused by the current lockdown. If there are no further initiatives to allow work to resume, another cash infusion will quickly fade, requiring a third level of stimulus.

If the objective is to stabilize the economy during a crisis, the last thing that anyone should support is the expansion of various transfer programs that could not command support in ordinary times. The bulk of the HEROES Act consists of huge cash payments to individuals and firms, and there is serious dispute regarding how these payments should be handled. After all, the benefits offered under the Paycheck Protection Program, which is providing loans to small businesses during the pandemic, raised real questions as to whether the money was being directed to the right firms for the right reasons. The program’s defects included money running out too soon and too many firms being asked to return funds because of potential disputes over eligibility.

Moreover, under the federal statutes, each program for monetary relief has definite periods during which funds may be distributed, leading to the principled objection that the first-line relief got the relevant trade-offs wrong by making a judgment about how the money should be spent, without taking into account the unanticipated twists and turns in labor and capital markets. One notable effort to avoid future debacles proposes to replace these fixed payment deadlines with automatic stabilizers, or “policies that cause spending to rise or taxes to fall automatically when the economy contracts.”

Yet the nagging question is whether the effort to avoid one form of financial shipwreck courts another. Accordingly, the first query should seek to understand what the new level of discretion is for these government programs when these fixed period targets are now replaced by these so-called automatic stabilizers. It would be nice to have some independent numerical target to guide the amount of spending that could be directed to housing relief, unemployment benefits, business assistance programs, and much more. Sadly, any effort to fine-tune the economy with these targeted payments would necessarily rely on economic data that is only available after the relevant decisions have to be made.

The herky-jerky reopening of the economy will not be aided by the fact that state-by-state policies change on a weekly, if not daily, basis. Many state leaders feel their hands are tied given the dire warnings that opening up the economy too quickly would spark an increase in COVID-19 cases.

We are therefore indeed on the horns of a dilemma that we cannot easily escape. On the one side, fixed rules of engagement remove some of the administrative discretion by putting fixed dates on various programs—which often have the sad habit of being revised by “unforeseen” events. On the other side, we could introduce a discretionary payments system without any idea of who best controls the levers of the system and ultimately decides whether the programs in question have failed or succeeded.

The difficult choice between these two approaches should force us to consider again whether to speed up the rate at which the economy is opened, even before there is any effective cure or vaccine for COVID-19, as in Georgia and Colorado. As my Hoover colleague David Henderson has effectively argued, we should give up the futile effort to control all of these activities from the center. The decision to reopen the economy removes the various restrictions that the government, in its regulatory capacity, has imposed on the economic liberties of individuals to go about their lives and earn an honest living. Such reopenings, now the first line of defense, will surely take into account COVID-19 every step of the way. The decisions that firms and individuals make—and not government regulations–will serve as the primary line of defense against the virus. There are many individuals, particularly those of advanced age or burdened with comorbidities, who will make the decision to self-quarantine without regard to the pressure of the state.

By privatizing these decisions, it should become possible to avoid the public health disaster that occurred when New York Governor Andrew Cuomo ordered nursing homes to take in COVID-19 patients that they were unable to accommodate, resulting in needless deaths, only for him to further compound the problem by issuing a unilateral edict requiring nursing homes to engage in mass testing, a regime which requires more capabilities than laboratories can presently supply. A quarter of the 22,000 coronavirus deaths in New York State were in nursing homes, a rate far higher than that of Florida which never allowed COVID-19 cases to be discharged into nursing homes. Cuomo then tried to minimize the magnitude of these mistakes by changing the way deaths are registered so that any person who dies in a hospital after being infected in a nursing home will not officially count as a nursing-home fatality.

It should be apparent that the Governor and his health officials have stumbled in seeking to save lives by putting vulnerable people in harm’s way. Why, then, have any confidence in their general powers? The situation is indeed worse than this because the principle of divided power, so central to a system of limited government, is wholly absent in the current set-up where governors and their advisors are permitted to operate under the cloak of secrecy.

Those state governors who are so fixated on COVID-19 are missing the forest for the trees. Cuomo, for example, asked: “How much is a human life worth? That is the real discussion that no one is admitting, openly or freely. That we should. To me, I say the cost of a human life, a human life is priceless. Period.” But scarcity of resources drives the need for tradeoffs. Anyone who starts from Cuomo’s premise is sure to allow greater harms to fester in the relentless mismanagement of the COVID-19 crisis.

© 2020 by the Board of Trustees of Leland Stanford Junior University.

Published in Economics, Healthcare
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  1. Clifford A. Brown Contributor

    Richard Epstein: Those state governors who are so fixated on COVID-19 are missing the forest for the trees. Cuomo, for example, asked: “How much is a human life worth? That is the real discussion that no one is admitting, openly or freely. That we should. To me, I say the cost of a human life, a human life is priceless. Period.” But scarcity of resources drives the need for tradeoffs. Anyone who starts from Cuomo’s premise is sure to allow greater harms to fester in the relentless mismanagement of the COVID-19 crisis.

    This is a political loser argument this year. The only “tradeoffs” you can effectively argue outside the conservative economist bubble, the only ones that will produce the effects you want, are deaths for deaths. President Trump has already pointed to this, as has Press Secretary Kayleigh McEnany. Here is the core of what you have to argue is balancing against the unknown/uncertain COVID-19 death toll:

    Q — say that in this room. I have a couple of questions. First, reopening. Dr. Fauci today stressed many times that reopening without following the federal guidelines and the gating criteria could lead to more outbreaks and could turn back the clock. Does President Trump still believe in these federal guidelines? And if so, why isn’t he urging states to follow them instead of asking them to move quickly to reopen?

    MS. MCENANY: Well, he has encouraged states to follow the guidelines. That’s still consistently our recommendation today, that you should follow the phased approach to reopening as outlined in the data.

    I do want to stress, as the President has stressed, that we do want to reopen this country because there are consequences that run the other way when we stay closed down as a country, and I want to run through a few of those with you.

    A hotline run by the Substance Abuse and Mental Health Services saw a 1,000 percent increase in responses during April, as we kept this country closed. Epic’s data said appointments for screening for cancer of the cervix, colon, and breast were down 86 percent and 94 percent in March. There are real consequences for that.

    I’m a BRCA2 — I carry a BRCA2 mutation, so I was someone who was regularly screened for breast cancer until I got my mastectomy. And when I went to my cancer hospital for screening, I didn’t see as many people in the halls.

    And that is quite frightening because the consequence of that is this: According to the IQVIA Institute for Human Data Science, a total of 80,000-plus diagnoses of five common cancers in the United States are protected — are projected to be missed or delayed during the three-month period of early March to early June, which is why this President has always said, “Go to your doctor. Do your screenings.” There’s a way to safely do this. If you feel chest pain, go to your doctor. We can’t scare people from going to hospitals. It’s a consequence of staying closed, though, when people are scared. They’re scared to even go to their doctor, and there are consequences for that.

    And finally, I would just point out a recent CNN article from Friday noted a national public health group that warned as many as 75,000 Americans could die because of drug or alcohol misuse and suicide as a result of the coronavirus pandemic.

    So there are consequences to us staying closed. And it’s why I believe it was eight medical groups came out with a statement — eight medical groups noted concerns that some people with symptoms of heart attack, stroke, and cardiac arrest are avoiding hospitals.

    So it’s why I’ve said from this podium, I think at least two times — today is the second or third — you’ve got to go to your doctor. We’ve got to encourage this country to safely reopen.

    Jobs versus lives is a lie. Do not reinforce the lie. It is lives versus lives. It is death versus death. Period. Every day of a governor’s orders restricting medical appointments and people’s employment is another day of quantifiable deaths that must be laid on that governor.

    • #1
    • May 18, 2020, at 5:44 PM PDT
    • 9 likes
  2. Ammo.com Member

    Great article and thanks for sharing!

    “How much is a human life worth?” is an absurd question.

    Timur Kuran’s work on preference falsification was an important breakthrough that has yet had enough application.

    From Wikipedia: When articulating preferences individuals frequently tailor their choices to what appears socially acceptable. In other words, they convey preferences that differ from what they genuinely want. Kuran calls the resulting misrepresentation “preference falsification”. In his 1995 book, Private Truths, Public Lies, he argues that the phenomenon is ubiquitous and that it has huge social and political consequences. These consequences all hinge on interdependencies between individuals’ decisions as to what preference to convey publicly. A person who hides his discontent about a fashion, policy, or political regime makes it harder for others to express discontent.

    And as simply stated in practice by Sam Harris in his article “DEAD BABIES ARE NOT AN ARGUMENT“:

    “For instance, more than 30,000 people die in traffic accidents in the United States each year, and many more are grievously injured. Much of this death and suffering is inflicted upon helpless children. But when was the last time you saw an image of parents howling with grief over the body of their son or daughter killed in a car crash? Children are killed and disfigured on our roads every day, and every day we fail to stop the slaughter. Yet a simple solution exists: we need only set the maximum speed limit on our roads at fifteen miles per hour. Why don’t we do this? The answer could hardly be more callous … We simply prefer to drive faster than that. Indeed, to drive so safely as to ensure the lives of all our children would be to guarantee inefficiency and boredom. Apparently, we judge these evils to be worse than some number of dead babies.”

    No matter how much power we grant the State, they can not indefinitely or completely insulate the population from threats. We need to be more honest about what we really think.

    • #2
    • May 18, 2020, at 6:22 PM PDT
    • 2 likes
    • This comment has been edited.
  3. MichaelKennedy Coolidge

    This is really easy. The blue states, counties and cities are determined to keep Americans home and in debt until the election. They think this will do two things. One, a Great Depression kept Democrats in power for 50 years, from 1932 to 1952 and longer in Congress. The red states, which voted for Trump or will do so, with rare exceptions, in November,. want to get on with their lives. Most are not government employees and are not employees of big corporations that can absorb losses. Small business people have traditionally been Republican and conservative. There is nothing to make you conservative as signing the front of paychecks every two weeks.

    The other thing the blue states’ officials have discovered is that power over others’ lives feels really good. It is a power trip as we see with Michigan Governor Whitmore and Oregon Governor Brown. Both are women and have undistinguished records.

    • #3
    • May 18, 2020, at 6:32 PM PDT
    • 6 likes
  4. Stad Thatcher

    Richard Epstein: Cuomo then tried to minimize the magnitude of these mistakes by changing the way deaths are registered so that any person who dies in a hospital after being infected in a nursing home will not officially count as a nursing-home fatality.

    I didn’t know this. What a slimeball . . .

    • #4
    • May 19, 2020, at 4:49 AM PDT
    • 3 likes
  5. EODmom Coolidge

    MichaelKennedy (View Comment):

    This is really easy. The blue states, counties and cities are determined to keep Americans home and in debt until the election. They think this will do two things. One, a Great Depression kept Democrats in power for 50 years, from 1932 to 1952 and longer in Congress. The red states, which voted for Trump or will do so, with rare exceptions, in November,. want to get on with their lives. Most are not government employees and are not employees of big corporations that can absorb losses. Small business people have traditionally been Republican and conservative. There is nothing to make you conservative as signing the front of paychecks every two weeks.

    The other thing the blue states’ officials have discovered is that power over others’ lives feels really good. It is a power trip as we see with Michigan Governor Whitmore and Oregon Governor Brown. Both are women and have undistinguished records.

    Couldn’t say it better. Power is sexy for either sex. But girls are really mean when they get going. 

    • #5
    • May 19, 2020, at 5:46 AM PDT
    • 1 like
  6. EODmom Coolidge

    Stad (View Comment):

    Richard Epstein: Cuomo then tried to minimize the magnitude of these mistakes by changing the way deaths are registered so that any person who dies in a hospital after being infected in a nursing home will not officially count as a nursing-home fatality.

    I didn’t know this. What a slimeball . . .

    An example of why you really can not trust much about the data being generated. Definitions differ state/state and change on the fly without disclosure. And you can not be too cynical. 

    • #6
    • May 19, 2020, at 5:47 AM PDT
    • 2 likes
  7. I Walton Member

    He’s trying to write rationally in the midst of insanity. The Federal taxpayers and folks who will suffer from the resulting inflation will be the biggest victims, those who benefit will be those who own real assets, not to mention gold. We need to let the states figure it all out and pay themselves without Federal help, but I suppose, even if Trump were willing, we can’t do that until after the election. Can anyone here imagine how we tighten when it hits or how a Biden presidency might manage this thing?

    • #7
    • May 19, 2020, at 6:32 AM PDT
    • 1 like
  8. Jon1979 Lincoln

    Stad (View Comment):

    Richard Epstein: Cuomo then tried to minimize the magnitude of these mistakes by changing the way deaths are registered so that any person who dies in a hospital after being infected in a nursing home will not officially count as a nursing-home fatality.

    I didn’t know this. What a slimeball . . .

    It’s even worse now, because Cuomo’s gone from the claims that any COVID deaths are an unacceptable outcome to basically saying “Hey, whattayagonnado? Old people are going to die from viruses.” because he knows he has to change the narrative back to where it was prior to the coronavirus outbreak — that a certain level of deaths each year from winter viruses is something society has to accept in order to remain viable for the whole — because Cuomo also knows voters in New York State are going to be looking at his actions in connection with the nursing home deaths in the upcoming months.

    He sees the bloom coming off the COVID-19 rose, and all the madcap appearances with his brother on CNN aren’t going to stop people from passing judgement, unless he’s able to adjust the narrative before the voters figure out just because you’re not Bill de Blasio doesn’t mean you’ve done a good job.

     

    • #8
    • May 19, 2020, at 6:44 AM PDT
    • 1 like
  9. Jules PA Member

    I Walton (View Comment):

    He’s trying to write rationally in the midst of insanity. The Federal taxpayers and folks who will suffer from the resulting inflation will be the biggest victims, those who benefit will be those who own real assets, not to mention gold. We need to let the states figure it all out and pay themselves without Federal help, but I suppose, even if Trump were willing, we can’t do that until after the election. Can anyone here imagine how we tighten when it hits or how a Biden presidency might manage this thing?

    #neverbiden2020

    Possibly with greater urgency than #neverhillary

    • #9
    • May 19, 2020, at 7:01 PM PDT
    • 2 likes