Can COVID Help Us Improve Our Economic and Social Policies?
The Coronavirus Pandemic left America with an almost impossible choice. If America didn’t shut down its economy, more than 200,000 persons would die. If America shut down its economy, 26 million American workers would file for unemployment insurance. The government would have to print and distribute $4 trillion dollars to distressed citizens and companies. This huge social bill could prove inadequate or worse, it might cause high inflation and reduce the value of the dollar. At least, that was the story we were being told by the traditional economists.
Most countries of the world made the first choice, to save lives by shutting down the economy. In Scandinavia, all countries but Sweden, adopted lockdown policies. Sweden, as a result, experienced twice as much deaths per million as Denmark and four times as many deaths per million as Norway.
Leaving the economy open is likely to substantially increase the number of deaths per million people.
Others have argued that the human costs of locking down an economy are also high, or even higher. They point to the number of persons who might have died because they couldn’t get adequate medical attention for their chronic heart, lung, kidney, diabetes or other problems. They point to the number of family problems induced by “stay at home,” such as wife or child abuse, suicides, increased alcoholism, drug abuse, divorce decisions and more murders They point to mental health problems caused by personal boredom and aimlessness. However, estimating the number of deaths resulting or harm caused by enforcing “stay at home” is difficult to estimate.
We will hear years of arguments over whether the forced closing of the economy was justified or overdone. Was there a middle way? Could the “stay home” enforcement be limited to senior citizens and others with ill-health, illnesses, or disabilities. Could three rules operate: 1. everyone wears a mask in public, 2. no gatherings of more than 10 persons, and 3. Persons stand 6 feet away from each other.
The main task would be to keep down the number of infected persons that could be handled by the existing health system where the doctors and nurses had a sufficient number of masks, ventilators and other equipment. The worst nightmare would be infected persons pouring into hospitals with no rooms for them and no medical staff to treat them.
What Does the Coronavirus Pandemic Teach Us that We Have to Fix?
The coronavirus events and traumas will undoubtedly usher in new views about the performance of our economy and society. Our dreadful experience with the coronacrisis has opened our eyes to the deep faults in our economic and social systems. There will be so much work to do after we finally develop the tests, treatments and a reliable vaccine. I would point to five awareneses and “fixes:”
- Our health care system is woefully inadequate, especially in a crisis.
- Our economy relies too much on supplies from abroad, leaving us without needed domestic goods in emergency situations.
- Our social “safety net” is woefully inadequate.
- Our banks and financial system need restructuring and more regulation.
- Our government needs to improve its staffs, expertise, and technology.
Let’s now examine the kind of “fixes” we can apply to each fault in our present system.
1. Our health care system is woefully inadequate, especially in a crisis
The U.S. health system is outstanding in many ways: excellent physicians and nurses; many fine hospitals with advanced equipment; many scientific studies; and many new medicines.
At the same time, we are becoming aware of many deficiencies in our health system. Many hospitals need upgrading but lack the resources. Many rural and small town areas in the country lack enough doctors to serve the area’s medical needs. The cost of surgeries (hips, knees, etc.) is extremely high compared to other nations. The cost of health insurance is very high. Many people can’t afford it and are not covered, and use emergency rooms as their solution when afflicted with an illness or accident. Our health care system is inadequate to ramp up and handle serious pandemic crisis.
The U.S. is currently debating two broad solutions that address questions of cost, accessibiliy and quality. One is to expand Obamacare, the Affordable Care Act, that provides a health insurance marketplace where Americans can purchase federally regulated and subsidized health insurance during open enrollment.
The other is for the government to establish a government health care system that is a right for all Americans and paid for by the government. However, many Americans are insured today by their companies and have their doctors and don’t want to switch to a government run system. Yet the government might still create a “Medicare for All” option that allows those who do not belong to an existing system to join the government system.
Note that all this is addressed to how to help sick persons and those with a long term illness. However, more thought needs to be given to increasing preventative care. Why do so many people end up with diabetes, heart or lung disease? How much is due to smoking, alcoholism, hard drug use, poor nutrition, and lack of regular exercise? The growing field of “social marketing” is addressed to preventative care. Social marketers design targeted campaigns addressed to specific groups to help people switch from harmful behaviors to beneficial behaviors that improve their health and well-being.
2. Our economy relies too much on supplies from abroad, leaving us without needed domestic goods in emergency situations
The U.S. lost many industries and jobs whose products could be made more cheaply abroad. Countries like China, Cambodia, Bangladesh and many others have low labor cost in the making of cotton goods and common products. American manufacturers now rely heavily on long foreign supply chains in making these goods. Much American manufacturing moved abroad, reducing the number of local jobs and devastating many rural and small town areas.
The coronavirus pandemic shocked our companies into realizing that our country lacked some essential goods, such as face masks, ventilators and many others. We had traded being resilient to being efficient. We needed to bring back some “lost” industries and skills, even at a higher cost of domestic production. Maybe some companies could be brought back with more efficient design including automation and AI, thereby reducing the cost of domestic production.
Another realization is that the sad conditions of many U.S. small cities and towns is due to the evaporation of local sourcing and manufacturing. Many of our tomatoes come from China 6000 miles away. Wouldn’t our tomatoes be fresher and more available if they were grown locally and consumed locally rather than shipped 6,000 miles? Added to this is the vertical farming movement where large buildings house the conditions for growing vegetables and fruits. Because of better controls at home, we would worry less that our imported food carried coronavirus traces from abroad.
3. Our social “safety net” is woefully inadequate
In a rich country like the U.S., it remains astonishing that 13 percent of its people, almost 40 million, live in poverty. This is not only homeless people, but people living in crowded homes or apartments, working two or three gig jobs that don’t include health care benefits, and who depend on social assistance to survive. Our social assistance or “safety net” program consists primarily of unemployment insurance that will be paid for a limited period and goes with the unemployed being willing to accept possible jobs. Unemployment insurance clearly is not enough. The government also runs a food stamp program where the person’s cost of food is lowered by their “paying” part of their food purchases with food stamps. Another layer of help comes from food banks and soup kitchens that are organized on a local basis by individuals and nonprofit organizations.
We saw the inadequacy of this system to serve the needs of distressed persons during the coronavirus crisis. Just as disheartening was to see farmers destroying their crops and dairy products because demand was too weak at a time people were so hungry. Couldn’t the government buy these surpluses and distribute them efficiently to the poor and destitute? Conspicuously absent was any system to address the mental health of distressed people who were shut in their homes unable to get personal help from others. These hardships finally led Congress to pass the CARE bills to print and distribute trillions of dollars to help needy and weakened working and middle class families and small businesses and some major corporations to survive.
When “normal” times return, the country needs to design a better safety net to handle crises of this kind.
The real issue is why do we continue to accept a 13 percent level of poverty. Can we not raise the top income tax rate on the rich (from say 37% to say 50%) and close a lot of tax loop holes? Should we expand the “earned income tax credit system” where the government contributes money to poorer families. Or should we move to Andrew Yang’s call for a universal benefit income (UBI) system where everyone gets $1,000 a month to live on?
4. Our banks and financial system need restructuring and more regulation
We are lucky that our citizens did not rush to their banks and withdraw all their money to put quickly under a mattress. Bank failures have happened with past panics. Possibly the “shut-in policy” kept people from rushing to their banks. They would be in danger of catching the disease from the panicked crowds.
Citizens might also trust that new regulations have compelled banks to have sufficient reserves. The real question is whether bank reserves are adequate. Bank reserves have to differ depending on whether the bank is a retail bank, a commercial bank, or an investment bank. The line between these three types of banks is blurring. Banks can earn more, if they accept more risk, by investing their client’s money in larger investments. Banks also might buy more risky, low grade paper as they did that triggered the 2008-2010 Great Recession. Are the banks able to protect us against future pandemics or depressions?
In addition, some banks have behaved in a greedy manner with respect to handling the distribution of government CARE money. Some set an excessive charge for delivering the money to the needy and larger businesses. To the extent possible, the government should distribute money directly to those in need without the intermediation of banks.
5. Our government needs to improve its staffs, expertise, and technology and raise its top income tax rate
Our government showed a poor response to the coronavirus pandemic. Let’s examine each level.
President Trump clearly failed by two to three months in recognizing the seriousness of this crisis. He thought that this was a Chinese problem initially and he stopped immigration from China. He put the whole effort in the hands of Vice President Mike Pence who knew very little about managing a major health crisis. Trump made statements that the crisis would soon be over, or that testing was ready to take place, or that ventilators and masks were available everywhere, or that hydroxychloroquine (which combats malaria) would also work to combat coronavirus, or even to consider injecting or swallowing disinfectants. Trump ran daily sessions where he spouted lies or mistakes about the disease, confusing his audiences and misleading his followers. His daily sessions took on the likes of political campaigns using every opportunity to malign the Democrats and their leaders such as Nancy Pelosi and Vice-President “sleepy” Joe Biden.
Meanwhile, Congress responded in a high polarized way. Senate Republicans resisted criticizing the President and stuck to their seven causes: guns, anti-abortion, small government, big business, lower taxes, reduced budget, and less regulation. House Democrats provided the leadership in addressing the crisis by supporting CARE acts to put money in the hands of distressed people and companies.
Another revelation was how depleted our government was of talented and skilled administrators. Trump chose to appoint primarily rich or personal cronies to run major cabinet positions and government agencies. He chose his daughter Ivanka Trump and her husband Jared Kushner to handle some assignments, in spite of their lack of skills or experience. He appointed Rick Perry, ex-governor of Texas, to run the energy department, where he knew nothing about energy. Trump appointed Ben Carson to run Housing and Urban Development even though he had no experience in this area. He appointed Betsy DeVos to head the Department of Educationated although she did not like or understand public education and wanted to turn it over to charter schools. Early in his administration, Trump staged a public session where each member of his cabinet spoke admiringly of Trump. Trump is quick to get rid of anyone who criticizes or departs from his way of seeing things. It is fair to say that Trump damaged the quality of leadership running our government agencies.
The disappointing leadership of Trump during the crisis was illustrated by state governors and mayors deciding to make their own decisions on how their state should handle the crisis. At one point, the majority senate leader Mitch McConnell, who held up more needed legislation than any preceding Republican senator, said that the states should just go bankrupt if they could not pay for the virus.
No wonder why American citizens hold such a low view of our politicians.
We didn’t need this crisis to become aware of these five problems. But having happened, the crisis creates an opportunity to make things better.
One should never waste a crisis by wanting the “old normal” to return. The “old normal” was full of people and places with serious problems. It was “normal” for the rich and the comfortable to ignore these problems.
Too many people think that mankind has mastered nature through its brilliant technology and scientific advances. It takes a pandemic to expose our vulnerability. We must use this experience to design a better “normal,” one that serves more people with a better life and well-being. We must not abandon Capitalism and Democracy as great systems for managing society. However, we must make them work better for more people. We must design them to advance the Common Good.