I’m so sick of all the epidemiologists on Twitter. One of them, my friend Robert, called me and said, “You know, if the viral shedding is below [blah] then you can’t get it. But depending on the generation of mutation in your region you might have a higher Ro.”
I said, “Rob, you’re a JANITOR. And nothing against janitors because I know you work hard, but what is going to happen to your epidemiology career once this lockdown is over?”
“I don’t know, man. I got really into this stuff. It’s all I read about night and day. I mean, I’m even reading some of the research coming out of the Epidemiology Department at Wuhan University. It’s pretty good!”
And I appreciate that. I get obsessed with things. Heck, I’ve been obsessed with this virus also. We all have. I think a lot of people don’t want to go back to work because this entire time they’ve been medical doctors and scientists and soon they will go back to being paralegals.
BUT… is opening going to be straightforward? What’s going on in Georgia?
Georgia was the first state in the U.S. to reopen.
I finally saw a news story yesterday that mentioned the reopening.
Apparently two women were fighting in the parking lot, on the ground, just beating on each other. And, of course, someone who was a few feet away decided to videotape it instead of actually helping them. And the video has 5 million views. Congratulations!
But I read the article about it and the article says, “An official says, ‘Perhaps we ended the quarantine too early.'”
I forgot that we were doing a lockdown of the entire economy to “flatten the curve” on people fighting each other in the parking lots of malls across the country. Mall fighting was becoming an epidemic and we needed to make sure the hospital system didn’t get overwhelmed.
So, yeah, look what happens when you open up too early! People just go straight back to pummeling each other right outside the local mall. Shame on you, Governor! We need more testing of violent tendencies before we open. When will those tests be available?
Amid all the B.S. headlines is something more. 20 million unemployed. This is very sad. As is almost everything about this pandemic (even the two people fighting, because people are stressed and we can see this).
The prior record was 15 million in 1932. Can you imagine? We just crushed the record set in the middle of the Great Depression. That is terrible.
BUT… the idea is that many of these people are furloughed and will hopefully get back to work.
Some of them will, some of them won’t. The unemployment rate is about 15% now. My guess is after a full reopening of everything (let’s say by September 1) the unemployment rate will be 9% and will stay around there for a few months.
I do agree with people who say we need another stimulus. I would, however, hold off on a “New Deal” sort of stimulus. These are the reasons why:
DID THE NEW DEAL WORK?
FDR, in his first 100 days in office, basically created a whole bunch of new government agencies to hire people to work on dams, tunnels, bridges, infrastructure, etc. Eight million jobs were created.
So why didn’t it end the Depression? In fact, there was another mini-depression INSIDE of the Great Depression in 1937.
Eight million jobs is a lot. And it was important because those eight million people were able to feed their families, have improved mental health, etc.
But the government has to pay for things and the way FDR paid for the New Deal was to create sales taxes on cigarettes, movies, radios, even soft drinks.
When you have a sales tax like that, it doesn’t affect rich people. It hurts poor people.
So the exact money you are taking from them at the cash register is the money you are paying them as a part of the New Deal.
Or, if the excess tax deters them from buying those products, then those companies do worse and hire fewer people.
Additionally, FDR froze wages and put other items in the New Deal agenda that all had very good intentions but ultimately led to fewer people being hired in the long run. If you keep wages high in a period of deflation, people will simply hire less because there’s no way for them to make profits if prices of the products they make are going down.
There were many other issues but those are a few. I don’t think the New Deal was necessarily bad but it did not solve the Great Depression and I think a lot of thought needs to go into it.
WHAT WILL ACTUALLY STIMULATE THE ECONOMY?
The reason Congress passed about $2.7 trillion worth of stimulus is, again, because that’s the amount of money the Federal Reserve thinks is going to be missing from the economy because of lack of spending during the lockdown.
The problem is this: Money that went to specific industries (like airlines or colleges) is not coming back into the economy so fast. They are going to be using the money to pay back debt, or simply put in the bank and get ready for a second wave, etc.
For a stimulus package to work it needs to increase what’s called “the velocity of money.” If I spend a dollar buying a newspaper and the newspaper guy buys a coffee with that same dollar, then the velocity of that dollar is $2.
If money stays in the bank then the velocity is $0.
So a BIG, TRILLION-dollar problem with the current stimulus is that it actually will do nothing for the economy in the short term. Hence my feeling that unemployment will stay high and that we won’t feel the full effects of the stimulus until 2021.
There are other issues: Not everyone got the $1,200 stimulus check. Not everyone got a PPP loan (for many reasons). And for companies that got a PPP loan, that money is frozen until employees come back and even then it might not be used if business is slow, which it will be.
SO THIS IS WHAT WE NEED TO DO
Another $2 trillion stimulus (because spending between March and August will be down more than $2.2 trillion — more like $4 trillion) needs to be passed.
And this time it needs to go directly to people.
Someone said to me, “But jobs hire people. Shouldn’t it go to the companies?”
Yes, ideally, but that just didn’t work so now we need to help people directly. There are many people who are hungry. I volunteer at a local church and help manage the enormous lines of people who need food. It’s getting serious and will only get worse.
Ultimately, 70% of spending in the U.S. is consumer spending. People buying food, clothes, shoes, movie tickets, etc.
If you want it spent in the economy, you just have to give it to people.
I spoke to Congressman Tim Ryan about this. He thinks a six-month UBI (universal basic income) of $2,000 / month / person would be a direct plus to the economy and I agree. With 100 million workers (approximately), you can do that for six months and spend about $1.2 trillion. Then use the other $800 billion to inject money into hospitals that are failing because they’ve been empty in anticipation of coronavirus patients.
THEN you will see money being spent.
How will we pay for this?
The difference between the U.S. now and the U.S. in 1933 is that the U.S. can borrow money at almost zero percent interest. And every country in the world wants to lend to the .US. I bet you can even do 100-year bonds at zero percent interest. That means the U.S. will owe the money in 100 years but essentially make no payments until then. And if the economy comes back. there will be inflation (but mild because of the demand around the world for the dollar) and in 100 years the money we owe will be discounted by 3% inflation every year.
THEN, I do think we need a real New Deal but not in the usual way. Here is where I agree with Mark Cuban. Let’s incentivize people to take online courses in “the new skills.” You don’t need to be a computer expert to get basic skills in AI, Big Data, robotics, drones, and many, many other areas. This sort of skill transition needs to happen but it won’t happen if people are bus drivers. Extend UBIs to people signing up for “accredited” online schools.
What about the states?
Require every state to start selling off public land, public highways, public colleges and other public services. These are services that either are, or could be, very profitable and run much more efficiently. The states get money to pay off their debts and the federal government makes money by taxing them.
Then any extra money can be used to invest in building other public services or assets.
Money has to come from somewhere. There’s no such thing as “printing money out of thin air,” although people use that phrase a lot. If the U.S. bails out the states, the states will be in big trouble when they can’t borrow anymore and the U.S. has to borrow to pay the bill.
Let’s help the people first. The states can be run like businesses and start selling assets. And then, finally, let’s do a New Deal based on taking our workers and teaching them valuable new skills for the next century.
Meanwhile, I am making use of this valuable lockdown time to learn new skills. Tomorrow is my second class on LessonFace.com for beatboxing.Share This Post