AFL-CIO has a Plan

From the AFL-CIO website:

PRIORITIES OF THE LABOR MOVEMENT TO ADDRESS THE CORONAVIRUS:

PROTECT FRONT-LINE WORKERS

• Streamline approaches for allocating and distributing personal protective equipment to working people in greatest need.
• Issue a workplace safety standard to protect front-line workers and other at-risk workers from infectious diseases.
• Provide workplace controls, protocols, training and personal protective equipment.
• Provide clear, protective federal guidance for different groups of workers with different needs.
• Increase funding for the Occupational Safety and Health Administration and Mine Safety and Health Administration for additional inspectors and health specialists, and for developing and implementing an infectious disease standard.

MITIGATE THE BROADER PUBLIC HEALTH CRISIS

• Guarantee 14 days of paid sick leave for all working people.
• Provide federal resources and guidance to increase capacity of the health care system, including hospital beds.
• Use emergency federal authority to expand production of medical supplies and equipment.
• Increase capacity to provide testing for everyone, starting with a priority for front-line workers that includes health care workers, firefighters and paramedics.
• Provide testing, treatment and vaccination (once approved) at no cost.
• Emergency federal subsidy of premiums for multiemployer health plans.
• Remove barriers to testing, treatment and benefits for immigrant workers.

SUSTAIN PEOPLE THROUGH THE CRISIS

• Reimagine the unemployment insurance system by dramatically broadening eligibility and increasing both benefit levels and administrative funding.
• In addition to paid sick days, guarantee 12 weeks of paid leave.
• A federal COBRA subsidy of 100% for workers who lose jobs or hours.
• Provide relief for payment on rent, mortgages and student loans.
• Issue a moratorium on foreclosures, evictions and student loan defaults.
• Increase funding and remove restrictions on the Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), Special Supplemental Nutrition Program for Women, Infants and Children (WIC), and the school lunch program.

SUSTAIN WORKERS IN SEVERELY AFFECTED SECTORS

• Severely impacted sectors include airlines, other transportation, construction, retail, manufacturing, entertainment and hospitality.
• The federal government should offer to assume payroll costs of idle or hibernating firms to ensure they stay in business and workers stay employed.
• Additional targeted assistance to private firms in particular sectors should be conditioned on providing paid sick days, with no layoffs, pay cuts, benefit cuts, outsourcing, reopening of union contracts, abrogating union contracts in bankruptcy or stock buybacks, and including workers on corporate boards.
• Provide aid to workers’ pension funds comparable to the aid available to business.
• Provide funding for public transit and Amtrak to keep workers on the job, and financial relief and flexibility for the U.S. Postal Service.

SUSTAIN STATE AND LOCAL GOVERNMENTS

• Provide federal funding for the full cost of Medicaid for one year.
• Provide federal grants to state and local governments equal to 7% of state and local revenues totaling more than $175 billion.
• Pass the Students in Response to Coronavirus Act (H.R. 6275).

REBUILD THE ECONOMY AND PUT PEOPLE BACK TO WORK

• Reauthorize the Surface Transportation Act.
• Pass a $1 trillion infrastructure package.
• Pass the Protecting the Right to Organize Act and guarantee comparable rights and protections for public employees.

The Mankiw CV Plan

Greg Mankiw has posted a suggestion for delivering money to people that targets the benefit to those who need it the most.  The idea is clever:

1. Pay people the benefit B.  (This could be spread over many weeks or months.)  Everyone gets the same B.

2. Next year at tax time, compute the ratio r Y(2020)/Y(2019), the ratio of each filer’s 2020 income, net of B, to their 2019 income and capped at 1.  Impose a surcharge of rB on tax liability.  This way people would pay back a proportion of B based on how much they needed it.  If their 2020 income was greater than or equal to 2019, r = 1 and they would repay B in its entirety.  If their 2020 income was zero, r = 0 and there is no surcharge.  (And no tax at all for that matter.)  Partial income losses would lie in between.

Clever and well-intended, but there are problems.

First, what’s income?  Does it include capital gains and losses?  If so, everyone who has a substantial chunk of financial assets will be able to claim zero income in 2020.  What about business losses?  Clearly, if income is defined expansively, as it should be for tax purposes, those who derive income from capital will come out ahead of those who rely on labor.

Second, how will repayment work?  For low to moderate income people who keep their jobs, tax liability for 2020 may be immense—a large proportion of their annual income.  Yes, if such people save all their B they can just apply it to next year’s payment, but how likely is that?  In practical terms, if the country is facing a wave of enforcement actions and bankruptcies a year from now, the repayment mechanism is likely to be abandoned.

Third, what are the incentives?  Mankiw predictably worries about labor supply, but I think the bigger problem is the immense incentive to work off the books.  Instead of saving only your fractional tax rate when you transact in cash, now you will add the savings on your surcharge.  No one who can escape official scrutiny will report any payments or receipts.  If your goal was to drive as much of the economy underground as quickly as possible, you would have succeeded.

I appreciate Mankiw’s attempt to tie provision of government support to the level of need.  One of the virtues of universal, untargeted social insurance, however, is that it requires a smaller enforcement apparatus and doesn’t turn people who play by the rules into suckers.

The Oil Price War

One consequence of the emerging global Covid-19 recession has been that it has helped push world oil prices down from the $60-70 per barrel range near rhw beginning of 2020 to $23.12 for West Texas Crude and $29.00 for Brent Crude, levels not seen since the end of 2008. But part of why that decline has been so sharp and deep has been thet Saudi Arabia has increased production while Russia has kept up production, despite the Saudis demanding that they cut production.  So there is an oil price war going on.

Of course this will tend to cushion the recession for oil consumers.  But the US has become a small net oil exporter, and reports have it that a subsidiary reason for the Saudis and Russians getting into this price war has been to tank the US fracking industry in oil and natural gas, which by most reports cannot dsurvive if precies remain as low as they are now.  So while US oil products buyers may be better off, the recession in oil producing parts of the US will be made worse.  It  should be kept in mind that a non-trivial parrt of the US economic growh in 2017 was a major increase in fracking activity, with half the increase in capital investment coming frmo that sector alone.  The damage to oil production in the US will probably exceed the benefits from lower prices at the pump in the US.

A curious corollary to this is that the leaders of both Russia and Saudi Arabia have made serious moves to enhance and expand their own power.  In Russia, Putin has moved to change the constitution so that instead of having to step down as president, he can run again twice more, keeping him still in as late as 2036, by which time he will be 84.  This still needs to pass a referendum, but few doubt that it will fail to do so, despite reported declines in Putin's popularity.

In Saudi Arabia, Crown Prince Mohammed bin Salman (MbS) has had several rivals arrested on charges of treason, which can bring the death penalty.  One arrested is the former crown prince, Mohammed bin Nayef, whom MbS forcibly removed in a coup supported by Trump.  Another is an uncle of his, Ahmed bin Abdulaziz, one of the few remaining brothers of MbS's father, with the line of succession having previously gone through them.  The charges are clearly trumped up, with Mohammed bin Nayef having been under house arrest since he was removed from power, and Ahmed bin Abdulaaziz having been very careful to avoid any public criticism of MbS.  But not good enough, they both need to be decapitated.

On Thursday Trump made an effort to prop prices ip  by announcing that the US would purchae 30 mbpd, and the pricce did rise about 25% that day, only fall back again the next day, with West Texas reportedly going below $20 at ibe point.  There is some ability to do this, although with limits as there is only about a 150 million barrels excess capacity in the US Strategic Petroleum Reserve, about one and a half days worth of global production, with about a fifth of that already gone.  There are definite limits to how much Trump can do on this.

But what this shows is Trump's priorities.  When the price decline first started Trump bragged that it would help US consumers, but now that the US oil companies have complained to him, he has shown where his interests lie, and this in the face of the need for massive spending to help defeat the Covid-19 pandemic.  Trump's priorities here are seriously messed up.

Addendum: I have just read that it is not just the Saudis, but that UAE, Kuwait, and Russia are all ramping up oil production.  This is not out of trying to crash the US fracking sector or anybody else in particular, but simply to maintain revenues in the face of declining prices, which is, of course, a destabilizing positive feedback effect in the short run: more production will drive prices down further, with people talking abou $10 per barrel and even lower possibly.  Costs are so low in the Persian Gulf that even at such prices they can operate in the black. But many of them, especially Saudi Arabia, have gotten overly puffed budgets based on much higher oil prices, and KSA in particular is on the verge of becoming a net debtor nation. A third of their budget is military/security. Expect some serious cutbacks in that, which is welcome.

Barkley Rosser

The Hammer and the Dance

Ordinarily, I would give some sort of summary of the Big Idea I am referencing. In this case, I will link to the essay, Coronavirus: The Hammer and the Dance What the Next 18 Months Can Look Like, if Leaders Buy Us Time, by Tomas Pueyo and say you must read it to get what I am talking about. O.K., in simplest terms, Pueyo outlines what is likely to happen with a do-nothing strategy, a mitigation strategy and a third strategy that he calls the "hammer and the dance."

Long story short: mitigation won't cut it.

This calls for a climate change paradigm check. The discourse has been all about mitigation for three decades and here we are in 2020 emitting -- up to a moment ago -- more carbon dioxide than ever. Here's the good news: our response to Covid-19 is going to cut our carbon dioxide emissions -- proving we can do it! How? By setting a target for gradual reduction of carbon dioxide emissions? Hell no! By locking down the fucking system.

Long story short: mitigation hasn't cut it for climate change.

Maybe it's time to go "hammer and dance" with fossil fuels. PULL THE PLUG on all non-essential fossil fuel consumption and only resume the associated economic activities when they can be carried out by solar or wind power.

For a Universal Debt and Rental Moratorium

Incomes are collapsing throughout the economy, and both businesses and individuals face a crisis in meeting fixed payments they can’t control.  The most direct step we can take is to temporarily suspend these payment obligations.

Suppose the government were to announce that, starting immediately, all stipulated debt and real estate rental payments were to be suspended for all borrowers and renters.  This moratorium could have an ending date of, say, two months in the future, with the option of extending it if circumstances require.  No interest would accrue to any of these obligations; in effect, we would be stopping the clock on them for a period of time.

Of course, if nothing else were done this would shut down the credit and rental systems completely for the duration of the moratorium, so a stipulation would have to be added that it applies only to debt or rental obligations established at the time of the announcement.  We’d all have to keep two sets of books, one for pre-announcement loans and rentals, the other for post.

International obligations are somewhat more complicated, but the economic heft of the US is great enough that these conditions could probably be imposed unilaterally on foreign counterparties, especially if the logic of this step persuaded other countries to adopt a similar course of action.

A debt moratorium would dampen some channels of financial instability and provide greater security for most participants in the economy.  By itself, however, it would not address the gaping hole in the real economy caused by shutting down whole sectors of goods and services production.  That requires other forms of stimulus.

Some Ideas for Pandeminomics

The starting point for all of what follows is that government, if it has the will to act, is currently in the driver’s seat.  Much of the private sector is facing a terrifying confluence of crunches: supply breakdowns, demand falling off a cliff for many goods and services, and a looming shortfall of liquidity to service debt.  A wide swath of business is on the ropes and needs a rescue from government.  This puts the power in our hands if we can wield it.  Of course, with Republican dominance in Washington and the continued loyalty of the Democratic Party to the liberal wing of the plutocracy, the likelihood that we will take advantage of this moment is small.  Still, the opportunity is there, and that’s the basis for thinking ambitiously.

1. Debt-equity buyouts.  There’s a lot of business debt, and borrowers face a crisis as their earnings tumble.  Andrew Ross Sorkin proposes a scheme in which the government would offer no-interest bridge loans to any and all comers, with repayment delayed until after the immediate crisis abates.  The key condition, and just about the only one, is that recipients commit to retaining 90% of their pre-virus workforce.  Dean Baker would go further and provide direct bailout support in exchange for quid pro quo’s, like zeroing out shareholders and limiting CEO pay.

Here is another idea.  Have the government offer to purchase any and all outstanding corporate debt, converting it into an equity stake.  Wipe the debt off the books and take a public ownership position instead, which could be used to pursue objectives, like cutting pay at the top and expanding worker benefits, that the vast majority of Americans support.

2. Public voucher purchases.  For the small business and self-employed sector, particularly in services, I like the Saez-Zucman idea of having the government serve as buyer of last resort.  Specifically, I would set up a public fund to enable the government—perhaps at state and local levels—purchase vouchers for future goods.  A massage therapist, for example, could sell a quantity of vouchers for future massage sessions, providing an income stream to make it through the quarantine.  When the crisis recedes, the government would distribute these vouchers to the public, either through a highly discounted sale or even free distribution.  Perhaps the vouchers could be for steep discounts, say 80%, off the posted price to all for a bit of post-virus income as well.

3. Medicare for All.  Free testing and treatment for coronavirus should be instituted universally and  immediately.  But there is plenty of evidence that comorbidity and -mortality is a big problem: the virus especially endangers victims who have other conditions, which means that expedited treatment of respiratory, cardiovascular and other diseases should also be on the agenda.  Ultimately, any argument for saving lives in the face of the coronavirus can be made for saving lives from other risks, so public payment for all significant health expenses and not just the coronavirus should be on the table.

4. Revenue sharing.  After decades of fiscal constriction, state and local governments have been stretched to the bone.  This has become apparent in the current crisis, with the limited surge capacity of local health and other services.  On top of this we are certainly going to see a plunge in revenues as the economy freezes up.  Only the federal government can borrow freely, backed by the bond-purchasing power of the Fed.  This means it is the responsibility of Washington to backstop the states and lower jurisdictions, so services can be maintained or expanded as needed.

5. Paid leave.  The equivocations of Congress on this front are shameful.  All workers who are unable to go to work, whether because of an illness in the family, lack of school for their kids, the suspension of public transportation or any other health-related reason, should receive this benefit, no matter how large or small their employer.

6. Expanded unemployment.  The US has one of the weakest unemployment insurance systems in the developed world, regularly reimbursing less than half the income of less than half the unemployed.  Now is the time to bring America up to code.

7. Fee and dividend: pay it forward.  Cash payments to the public are already planned, and much of the debate is about their size.  Here is a different approach.  If we are serious about climate change, we will have to adopt a program to limit carbon emissions as soon as possible.  There are only two ways to do this, a tax on them or a system in which a permit is required to bring fossil energy into the economy.  If the permits are auctioned off, as they need to be, either option will result in a flow of carbon money from the public to the government.  (I’m strongly in favor of the permit approach, but that’s a story for another day.)  The best thinking on this issue points to the strong desirability of returning this money back to the public in the form of an equal per capita rebate.

So why not begin setting up this system now, but start the rebate immediately while phasing in the carbon pricing a year or so later to provide a financial injection?  One recent study found (by extrapolation) that a $100 per metric ton carbon price would generate over $800 in annual rebates to each citizen of the US.  For a household of four this would mean more than $3200 per year.  Why not simply transfer this amount to each of us now as a way to introduce the full program?  (I realize that excluding non-citizens is a problem, but the specifics of how to address it would take us too far into the weeds right now.)

8. Coordinated renter/homeowner support.  We are seeing many local and state-level initiatives to prohibit eviction of renters during the current crunch, and this should be extended nationwide.  At the same time, if renters are temporarily released from the obligation to pay rent but noncommercial landlords, like families that rent out a flat so their home can be affordable, are held to every penny of their mortgage, a crisis ensues—one that isn’t in the interest of either renter or owner.  It’s important, then, for measures to protect renters to be accompanied by similar measures to suspend or reduce mortgage payments.  This can be done only at the national level.  In fact, mortgage relief was originally intended to be a component of the post-2008 stimulus program, but it was never taken seriously by either political party.  This time around we should make up for past errors.

This is what occurs to me after a day of reading virus commentary.

Has the FDA Approved a COVID-19 Treatment?

Before I note perhaps the most irresponsible comment from Donald Trump today, let me note I strongly support research into finding an effective treatment. Pardon me for saying the obvious as certain Trump cheerleaders are not accusing people like me as wanting massive deaths just to make their fearless “leader” look bad. Of course, these Trump sycophants have a long history of being utterly disgusting so let’s move on by noting a great post from Robert Waldmann:

I think that it is important to get the FDA out of the way (by executive order if necessary) ... I think there should be mass production and use of Remdesivir starting on the 5th of March

Robert notes that I have been following Gilead Sciences phase III trials of this potential treatment as well as their stock price, which can be seen as an indicator of the market’s view on the probability of eventual success. Its stock has been up somewhat of late but they note they are not quite there yet. Under Menzie Chinn’s place, I also provided this link:

French manufacturer Sanofi has said it could hypothetically offer enough doses of Plaquenil – a drug containing the molecule hydroxychloroquine – to treat up to 300,000 people if necessary. Chloroquine is normally used mainly to prevent and treat malaria, and also to treat auto-immune conditions such as Lupus and rheumatoid arthritis. In China, ongoing Covid-19 clinical trials have successfully used chloroquine phosphate and hydroxychloroquine to treat coronavirus patients. In France, renowned research professor Didier Raoult – who had been tasked by the French government to research possible treatments of Covid-19 – this week posted a video detailing “promising” results of a chloroquine trial of 24 Covid-19 patients in France. Professor Raoult – from infectious diseases institute l’Institut Hospitalo-Universitaire (IHU) Méditerranée Infection in Marseille (Bouches-du-Rhône, Provence-Alpes-Côte d’Azur) – said that the infected patients he had treated with the drug chloroquine (under the name Plaquenil) had seen a rapid and effective speeding up of their healing process. They also saw a sharp decrease in the amount of time they remained contagious, he said. Yesterday (Tuesday March 17), government spokesperson Sibeth Ndiaye said that similar clinical trials would now be extended to more patients, but said that there is currently no definite “scientific proof” that the treatment works. She said: “[New trials] will be completed by a team independent of Professor Raoult.” Some experts have warned of the dangers of authorising the use of chloroquine too quickly, in the absence of wider studies, and said that the side effects of chloroquine can be severe, especially in the case of overdose.

The last sentence is key in seeing why what Trump said today was beyond irresponsible:

President Trump confirmed Thursday morning the FDA’s rapid approval of a drug called ‘Chloroquine’ to be prescribed to help treat patients suffering from the Coronavirus.

Of course, the FDA has corrected this lie by noting that they have approved further clinical trials. But this important distinction is lost on people who listen to Sean Hannity as well as all those other Trump cheerleaders. Update: A report on the stock price movements yesterday for Gilead Sciences:

On the stock market today, GILD stock surged as much as 8.2% on Trump's statement during a press conference that its experimental coronavirus treatment is "essentially approved." But shares didn't hold after Hahn cautioned the testing process is far from complete. It's possible to have the "right drug" but the "wrong dose," Hahn said during the briefing at the White House. "That can cause more harm than good." Shares of GILD ended the day down 1.1% at 78.55.

The investors who paid $81 a share earlier yesterday should sue Donald Trump for his misleading statements.

The Coming Fiscal Crisis Of State And Local Governments

Yesterday my wife Marina and I mt with our personal attorney, a close friend also, to fix  some loose ends in our wills due to some recent family deaths, as well the current situation.  He also happens to sit on the Harrisonburg City Council, as well as having been Mayor for awhile and a longtime member of the city Planning Commission, someone whose competence we have great respect for.  Anyway, he noted that on April 14 the City Manager is to present a proposed budget to the City Council, and that it will have a giant hole in it given that taxes on restaurants are a significant source of revenues for the city, and while not completely shut down, restaurants are now seriously restricted in their activity, not to mention that students will not be returning this semester, and they provide a lot of business.  In short, the city will face sever budgetary problems as the now occurring recession proceeds.  It is not only Harrisonburg that faces this problem, but probably just about every state and municipality in the United States.

Obviously this is currently low on the priority list of most people, and while Congress has now voted for a stimulus bill that will help out indiviuals and businesses, and another may be on the way, so far there  has not been a whisper regarding a likely need to help out state and local governments, who, after all, contribute more to the US GDP (and employment) than does the federal government, which mostly just ransfers money, except for the DOD in substantial terms.  The problem is that unlike the federal government, nearly all state and local governments face balanced budget rules for their current activities, with most needing to pass bond referenda for specific projects in order to borrow money.  So when the revenues fall short, which they shortly will start to do for all these state governments, they will face the choice of cutting spending and laying off workers or raising taxes on populations facing sharply reduced incomes and employment.  The sooner the federal government recognizes this and starts to do something, the better, although probably for now natonal politicians are hoping this will all be over before too much damage happens to the local governments, to the extent they are thinking about this at all, which I doubt.

I note that in the Great Recession, this problem was recognized, and the 2009 fiscal stimulus plan by Obama included as about a third of its spending the distribution to state and local governments of revenue  sharing.  This did help out their  problems that arose at that time.  Doing so again I think would be wise, but again, for the moment this problem is under the radar at the national level.

Barkley Rosser

Has The Ukrainian Anti-Corruption Campaign Come To An End?

Quite possibly.

In today's Washington Post, p. A8, Robin Dixon and David L. Stern report that President Voloymyr Zelensky has removed anti-corruption General Prosecutor Ruslan Ryaboshapka and is replacing him with Uryna Venedkiktova.  She is associated with the oligarch Ihor Kolomoisky, who has long been the main backer of President Zelensky and who had his control of a major bank removed previously.  Observers have long viewed Zelensky''s connection with Kolomoisky as a danger point in his up-until-now largely successful anti-corruption campaign, which had given much hope to many in Ukraine, where in the last year the economy had grown at a stron 4 percent annual rate.  Some obserers say that if Ryaboshapka had been able to last another six months, his removals of corrupt prosecutors could have reached a critical mass that would have been irreversible.  But he stepped on too many powerful toes whose feet walked to Zelensky to pressure him to stop the campaign.  The new appointee claims that "the law will be obeyed," but most observers are not optimistic.

Obviously this has implications for the relations between Trump and Zelensky.  With Biden now the presumptive Dem nominee, and Trump and Guliani having long pushed Zelensky to bring back corrupt prosecutors who had been removed and were playing along with the efforts to smear Biden, it may be that this new move will be followed by Zelensky moving to help Trump out in his efforts, although that may not necessarily be the case.  In any case, observers now fear that the General Prosecutor's office will return to what it has been before, a conduit for the president to prosecute personal enemies and opponents.  Whatever happens between Zelensky and Trump, this is not a good sign for the future of Ukraine.

Barkley Rosser

To Slow Spread Of Coronovirus, End Iran Sancttions

On 3/13/20 in Foreign Policy Focus, Ariel Gold and Medea Benjamin argue that to improve the global coronavirus problem, sanctions on Iran should be lifted, quite aside from the fact they should never have been imposed in the first place as Iran was adhering to the JCPOA nuclear deal.

The effect of the sanctions has been to tank the Iranian economy, including its health care sector, much worsening the coronavirus epidemic in Iran, thus making it more likely to spread to the global pandemic. The Iranian rial has fallen by 80 percent, making it far harder to purchase medical equipment from abroad.  This has not only aggravated the coronavirus situation but also that of many other diseases as well. As of March 13, there were 11,362 reported cases and 514 deaths.

Of course this is aggravated by the Iranian regime imitating those of China (initially) and the US (until very recently) in denying the conditions in their country and being slow to act with testing and other measures. But the bad behavior of the regime does not justify the US and others acting to worsen the health crisis in Iran, which makes it more likely to spread its problems elsewhere as well.

Barkley Rosser

Benefit-Cost Analysis and the Coronavirus

We are in the middle of a flurry of decision-making on how to deal with COVID-19.  After much resistance, officials are now canceling public events, closing schools and discouraging other activities that put us in contact with each other.  Travel restrictions and possible shutdowns of workplaces, as we’ve seen in Italy, may be up next.

It’s interesting we haven’t heard anything about benefit-cost analysis in all this.  Nearly all economists profess to think that BCA is the single best decision method.  Almost every introductory economics textbook is built around benefit-cost thinking, and for decades federal regulations have mandated BCA for proposals with significant economic impacts.

But now we are facing immense choices—what could have a more drastic impact than shutting down most of the economy by fiat?—and BCA is nowhere to be found.

As a public service, here’s a quick and dirty.  Coronavirus policy is primarily about saving lives, right?  So, if you believe in this sort of thing, the official “value of a statistical life” (VSL) as determined by the Environmental Protection Agency is $7.4 million.  According to BCA wisdom, we should spend up to this amount to save the life of a currently unknown (statistical) person, but not a penny more.*

In order to get a first impression, suppose the more stringent measures proposed will shave 1% off US GDP for the year.  Based on last year’s figure, that would eliminate $214 billion in economic value.  Using the value of life metric, that means we shouldn’t do this unless we expect to save at least 28,919 lives.  If not, let’em die.

Actually, I think it’s likely that we will see even greater economic costs from stringent social distancing policies, especially taking into account that the economy would probably have grown by a couple percent or so this year had the virus not struck.  Maybe these actions would pass the BCA test, maybe not.

Personally, I think it would be madness to stick a monetary value on people’s lives and base our policy choices on whether the dollars on one side of the ledger outweigh those on the other.  I wrote a book about that a while ago.  The considerations that lead us to think primarily in public health terms at a time like this apply just as well to other issues, from food safety to climate change.  The economists who crank out monetary values of life and believe all choices should be based on benefit-cost thinking have not yet had the integrity to step forward and make their case.  This silence speaks volumes.

*On a technical point, economists at EPA and elsewhere argue that the VSL should vary based on the population at risk.  Since mortality from the novel coronavirus is higher for those in the highest age brackets, and death from the disease would eliminate fewer years of life for them than for younger people, their VSL should be lower.  It may also be the case that mortality will be lower among those with higher incomes, who can afford better preventive measures and treatment, further depressing the relevant VSL metric.  But these considerations would require even more lives saved to justify the expense.

Europe’s Response to Coronavirus and the Implications for the U.S.

As I listened to the morning news about the coronavirus crisis, I was reminded of this critique of the Eurozone:

In a recent conference, the distinguished economist Paul Krugman repeated the oft-heard critique that the eurozone is not an optimal currency area. Waltraud Schelkle disagrees with this characterisation, and argues that no country or group of countries represents an optimal currency area – one region or country always loses out from a single monetary policy. But countries can use fiscal, social and regulatory policies to overcome these difficulties. When Americans criticise the eurozone’s currency policies, she writes, they are forgetting the US dollar’s shaky start and the adjustments which had to be made to the financial system in the 19th century.

Why mention the optimal currency area debate in reference to this health crisis? This morning I heard statements like this one:

By contrast, the coronavirus crisis has started to look more like the European migration and financial crises: a symptom of globalization that can’t be held back where it started. The exploding outbreak around the Continent — officially declared a pandemic by the World Health Organization on Wednesday — highlights both the promises and limitations of the European Union: a single, largely borderless market made up of 27 countries, each with their own governments, electorates, bureaucracies, health care systems and, as has become painfully obvious, national interests. For weeks, officials in Brussels and national capitals have called for pan-European coordination. Yet even as Italy, the bloc’s third largest economy, embraces a made-in-China solution — putting the entire country under preventative lockdown — the modus operandi across the EU remains fragmented and reactive.

The United State of America like the European Union as we are a single borderless market made up of 50 states. One would hope we would have pursued for a pan-America coordinated response but until yesterday we saw leadership at the state level but not much from the Administration:

States are scrambling to prepare and respond to the coronavirus outbreak, petitioning Washington for changes to federal health insurance programs that could help them save lives ... With thousands of Americans infected and dozens dead, the Trump administration has yet to find a way to effectively test for the presence of the novel coronavirus. But it’s the President’s ongoing refusal to declare an emergency over the disaster — which would unleash aid, funds, and FEMA — which continues to hamper state-level planning… Medicaid Health Plans of America, the program’s trade association, issued a statement on Wednesday demanding that CMS set consistent guidance for state departments of health that would include waiving cost sharing for people who are testing for or have been diagnosed with COVID-19 … Different states have addressed the crisis differently.

We should applaud our local governments as well as the prudent responses of private sector agents like the professional sports team. We should also be glad that this White House decided to finally shown a wee bit of belated leadership. But the delay in declaring a national emergency has been incredibly costly to both the economy as well as the health of many of our citizens. But this is what we get when we elect a President who does not like agencies like FEMA or the Pandemic Task Force.

What Might That Compromise On Health Care Between Biden And Bernie Look Like?

As discussed in an earlier post it looks like there is an as yet undetermined compromise between the ACA plus public option with some other items supported by Joe Biden that unfortunately lacks the crucial matter of universal health care coverage (although he professes to support such) with the single payer plan supported by Bernie Sanders, somewhat modeled on the system of Canada, although more generous and less open to private insurance than Canada's but definitely including universal coverage.  Obviously Biden's plan has the problem of lacking universal coverage while that of Bernie appears to call for the end of private insurance, which might save money but also seems to be unpopular and thus damages his potential electability.

It certainly looks like a possible compromise should be out there, and according to polls of Kaiser, such a compromise that has a mixed public/private system with universal coverage is well ahead of all other alternatives in the eyes of the US population.  And, indeed, the vast majority of other high income nations have just such a system.  They are the ones that are not the UK or Canada or US, pretty much all the others, although they have wide variations among them of their systems.  The Obama admin sort of tried to get there by imposing the individual mandate to ty to get everybody covered, but it was unpopular from the start and never seriusly enforced, before the Trump admin got rid of it.

So here is a bit of coverage of what is out there in nations that have mixed systems and universal coverage, noting that it is much easier for all of them to manage it compared to the US given their lower costs.  So some look like what ACA almost was, essentially an enforced individual mandate system although with varying patterns of subsidies and backups for the backup public health care system. Among the highly rated systems the Netherlands and Switzerland fit this pattern with Switzerland having more of a private system while the Netherlands has more of a public one.  Switizerland's reuqires higher co-payments, much like what came out of Obamacare/ACA, although Switzerland does have that universsal coverage.

Most of the other systems have larger public portions, although with private elements in various ways.  Let me note as simply one example the widely praised system of France.  The payment is upfront, labeled as an insurance premium but essentially a tax, and individual mandate if you will, but enforced.  With that one has a choice of vsrious systems.   Three are public, with the dominant one covering 84% of the ppulatoin while the other two cover another 12%. The remainder are covered by various non-profit private plans. People using one of the public plans can also get supplemtnal privare insurance from one of those non-profits, and the ultimate divide is 78% public and 22% private in terms of the provision of insurance. The whole thing costs 11.3% of GDP compared to the 17.1% in the US for health care.  And, of course, France does much better on botom line life expectancy and other health outcomes than the US, although apparently the system has been suffering in recent years from some doctor shortages and is probably not the top rated in the world as it once was.

But then, all systems are imperfect, even if so many of them seem to do better than that in the US.  Somehow it does not seem that it should be so difficult to get to one of these intermediate systems that are so pupular among Americans, but somehow for now no presidential candidate is proposing.

Barkley Rosser

Are US Treasuries Really Facing A "Liquidity Crunch"?

That is what I just saw on an internet report, with 30-year Treauries supposedly especiallly hard hit. Rather stunning was a figure showing trading costs, which have supposedly massively spiked in the last week or so, reaching the highest levels since 2008.  Apparently this may be tied to exceptionally high volatility in the bond markets, especially the long term ones, which may explain it, although this has not bee much reported, I guess with so much attention on the volatile and mostly crashing stock markets.

What makes me wonder about this is that usually a lack of liquitdity results in higher yields on bonds, but this report also noted that in the last few days we saw for the first time ever the entire U Treasuries yield curve below 1 percent.  Indeed, I am under the impression that the old "safe haven effect" is operating, with foreign money flowing into US securities for safety.  But this report claims that people trying to sell 30 year bonds in particular have been having trouble finding buyers.  I confess that all this does not seem to hold together, although it may be that there have been brief moments of such lack of liquidity interspersed with periods of lots of it. 

Needless to say, the US Treasuries market is about as foundational to the entire global financial system as any market.  If somehow it seizes up in a serious way, the situation is going to get far worse in the financial markets and the economy than anybody has been talking about so far.

Barkley Rosser

McCoy Tyner Dies, RIP

Several days ago, McCoy Tyner died at age 81.  He was one of the greatest living jazz pianists at the time of his death, with perhaps only Keith Jarrett his serious rival, although others might beg to differ.

He was most  famous for having been the pianist in John Coltane's "classic quartet," along with Jimmy Garrison on bass and Elvin Jones on drums.  Their most famous album was "A Love Supreme," one of the greatest jazz albums of them all.  He also produced a prodigious body of excellent work after he left that group, and was active up until near his death.  In later years he sometimes played with Coltrane's son, Ravi.  He had known John Coltraane from when they were both young in Philadephia before they became jazz musicians.

I saw him perform several times over the years, although when I saw Coltrane, Tyner was no longer in the group.  The last time I saw him was just a few years ago at the Blue Note in New York (he lived in New Jersey).  He had to be helped to walk to the piano, which we were sitting very close to (and even spoke with him briefly) but once he started playing ne was all there, those strong pounding chords mixing with his fine lyricism.  He was immensely influential, but there will be none like him.

RIP, McCoy Tyner.

Barkley Rosser