The average age of a Covid-19-tagged death here in Massachusetts is 82. Thus, presumably to the extent that any lives are saved from Covid-19 by our educational, social, and economic shutdown, they will be roughly 82-year-old lives.
Let’s assume for sake of argument that the shutdown makes sense as a mechanism for saving lives. Flatten the Curve will save more people from Covid-19 by delaying their infection than will be killed from (a) the shutdown of regular health care, (b) poverty and unemployment, (c) starvation in poor countries, (d) the suspension of clinical trials for new drugs, (e) the suspension of clinical training for the next generation of medical doctors, etc.
Now that we’ve assumed shutdown is an actual life-saving mechanism, we come to the cost and who pays. Just this year’s federal budget deficit is on track to be $4 trillion. So that’s $4 trillion that will be borrowed before the inevitable bailout of the big-spending state governments (not allowed to issue bonds so they borrow by making public employee pension promises that they don’t fund).
The ordinary borrowing mechanism of the federal government imposes the costs onto people who are still young enough to work and pay taxes, right? And since federal government tends not to repay debt, but merely roll it over and pay more interest, the younger the person the more he/she/ze/they will have to pay, right? Is it fair to say, then, that Americans who are currently in their 20s will bear the highest burden from coronashutdown? (current children will pay too, but they won’t start paying taxes for a few years yet so their future payments have to be discounted)
Is this our revenge on them for saying “OK Boomer”?
(The young folks above would be violating our Massachusetts town’s mask order, but the photo is from Portsmouth, New Hampshire (“Stay Home or Die” will be the new license plate motto?) so they’re not breaking the law there.)
“The ordinary borrowing mechanism of the federal government imposes the costs onto people who are still young enough to work and pay taxes, right?”
Sounds like you may still be feeling the Bern. If you don’t want to put the burden on younger people, another common proposal (pitched by both Sanders and Warren) is a wealth tax. (Or perhaps increased taxes on capital income.)
I don’t recall you making the same argument when Trump passed the $1.5 trillion tax cut, though. Instead you suggested that young people didn’t like it because they lacked entrepreneurialism.
I am not sure what the relevance of a tax rate cut is to a shutdown of the economy. The $1.5 trillion figure for the Trump tax rate cuts was a worst-case scenario over a 10-year period, not $4 trillion in one year. And the wealth was left with citizens, potentially to be taxed in the future (if the rate cuts did not result in the hoped-for revenue boost), not simply never created because people were on couches watching Netflix, drinking booze, and popping opioids.
(I’m a believer in Hauser’s law, i.e., that the federal government’s tax revenue won’t be dramatically affected by changes in rates: https://en.wikipedia.org/wiki/Hauser%27s_law (the economy might be much larger with lower rates, however, so this is not to say that tax rates don’t matter for the society, only that high rates don’t enrich the government the way that advocates hope))
Even before COVID-19, the US was running a trillion-dollar deficit. This didn’t appear to be setting off any alarm bells for you.
From the parallel universe that is Canada: It’s like wartime. Instead of sending people to fight, we’re sending them home, but either way, they need to get paid. Even as we start to loosen restrictions and more people get back to work, bringing down the cost, the war’s not over until we have a vaccine. Once the war is over, we’re going to have to pay down the debt, through some combination of economic growth (resulting in higher tax revenues) and higher tax rates (we lack your belief in Hauser’s law, and the economic debate here focuses on which taxes are least distorting).
“Even before COVID-19, the US was running a trillion-dollar deficit. This didn’t appear to be setting off any alarm bells for you.”
Are you being denied access to Google up there in the Frozen North, Russil? I did a quick search into my own site and found
https://philip.greenspun.com/blog/2010/05/20/should-old-people-be-allowed-to-vote/
https://philip.greenspun.com/blog/2011/04/09/should-13-year-olds-be-hectored-into-charity/
https://philip.greenspun.com/blog/2010/02/25/paul-krugman-profiled-in-the-new-yorker/ (my comment )
https://philip.greenspun.com/blog/2012/11/27/wall-street-journal-article-on-calculating-federal-government-liabilities/
“The festival of deficit spending could end and taxes raised so that we’re actually paying for all of the stuff that we demand from our Great Father in Washington.” from https://philip.greenspun.com/blog/2018/12/30/time-to-buy-foreign-stocks-and-emerging-markets-in-particular/
re: the states https://philip.greenspun.com/blog/2009/09/18/pensions-how-states-and-local-governments-indulge-in-deficit-spending/
But I think that my personal fears regarding deficits, expressed over the decades, reflect (a) personal negative experience during the Jimmy Carter runaway inflation years, and (b) a serious conflict with fellow Americans, most of whom are determined to spend beyond their means.
Anyway, I’m happy for you that Canada is shut down. I am not sure that this is an achievement that other countries can replicate, however. Canada’s wealth rests primarily on the natural resources that immigrants stole from Native Americans (“First Nations”). The farmland that immigrant Canadians stole and the oil, gas, and diamonds that Canadians stole will still be there after rich Canadians come out of their bunkers. The trees that Canadians like to clear-cut will still be waiting for the saw blade. The cod would still be waiting to be caught by trawlers if Canadians hadn’t already caught them all (https://en.wikipedia.org/wiki/Collapse_of_the_Atlantic_northwest_cod_fishery ).
This strategy doesn’t work as well for a country whose wealth is based on an active economy, e.g., doing engineering and manufacturing, rather than a small population passively exploiting natural resources. (Qatar also should spring back nicely from this collapse and it won’t be because of some brilliant government policy, I don’t think.)
Thanks for compensating for my inability to use Google! (I was curious about your commentary on Trump’s tax cut – you seemed to think it was a good thing – but didn’t think to look for your comments on deficits in general.)
Canada’s evil-based economy doesn’t seem that different from that of the United States. In Canada, the service sector accounts for 70% of GDP; in the US, it’s 80%. Small businesses in Canada are just as vulnerable to an economic shutdown.
I take it you’re not a fan of Bernie’s wealth-tax idea for intergenerational equity?
Russil: Trump’s corporate tax cut was a great thing for the U.S., in my opinion! The alternative was a high tax rate on a zero base, as all corporations migrated to lower-tax HQ locations, such as Canada, the UK, Ireland, et al. It wasn’t sustainable to have the world’s highest corporate tax rate.
Both Canada and the U.S. would have a lot less to spend, I think, if not for the stolen natural resources. The “services” you’re citing often are related to exploitation of natural resources. Have a look at https://www.cia.gov/library/publications/the-world-factbook/fields/211rank.html
Japan would seem to be the best-case scenario for a big country without substantial natural resources. Each person there can spend $43k/year versus $48k in Canada and $60k in the U.S.
I don’t think that current residents of the U.S., on average, are as well educated or hard working as Japanese. So maybe we would have $35-40k/year to spend if we ran the U.S. without what we stole from the Native Americans? Maybe Canadians would do even worse?
Am I a Bernie fan? Of course! I voted for him twice now! https://philip.greenspun.com/blog/2016/02/23/how-i-learned-to-love-bernie-sanders/
I’m not quite rich enough to give a truly compelling argument against wealth taxes, as the hero Bill Gates has done (see https://philip.greenspun.com/blog/2019/11/07/bill-gates-income-taxes-great-wealth-taxes-bad/ )
Much as I love Bernie, I think both he/she/ze/they (not sure of Bernie’s current gender ID) and Elizabeth Warren share a parochial attitude in which the U.S. is the only place on Planet Earth to live and/or do business. So they reject the lesson of the EU, which is that a VAT tax on consumption has to be the primary revenue source for purely practical reasons.
Americans were awesome at tax-avoidance from the 1950s-1970s and then can re-learn these skills once again.
I have changed my mind on this stuff. I now think we need a go back to regular normal as fast as possible and for all those under 55. Open all the businesses and just go back to the old normal. Maybe ask them to wear masks but make all the other rules optional for under 55 people. Let the young attend sports and big meetings and travel on crowded planes and eat at dine in crowded restaurants, etc..
Then ask all those over 55 to quarantine at home and use delivery and so forth until we find better care or
a vaccine for Covid 19. Also put strict rules in place for nursing homes and rehab places.
Yes this will cause some younger people to get Covid19 and have stay home sick for week. But very few will die and society will get back to almost normal. No one will starve or go hungry due to no work.
Funny you said that. I suggested exactly the same scenario to a friend of mine who’s in his late 60’s about a month ago when it became clear that young people are not affected very much.
He rejected the plan outright but was honest enough to admit that the only thing he cared about was fear of dying from the virus. Any appeal to logic was useless: “everyone has to stay locked up for as long as it takes to create a vaccine” in his words. If it takes forever, so be it. I’ve never suspected him to be such a selfish coward? (for lack of a better word), and I’ve known him for 30 years. Pretty bizarre.
This is already starting to happen in the San Francisco area. For the whole shutdown I have been driving to work two or three days a week (Essential Services!). For the first month, the freeways had almost no traffic. Over the second month, there was more traffic every week. Last week was the first week with commute bottlenecks on the freeways I travel.
People who can work at home are still doing it. Many others are quietly heading back to work.
I’m all for death if that is the consequence of living.
All of what you write is correct and we’re going to do it all anyway absent a huge upwelling of national will not to go out this way. The cataclysm must continue until we have a vaccine. And if the Harris/Sanders/Markey-Khanna/Ryan $2000 a month paychecks start rolling, we’ll be adding $3.6 trillion a year to the deficit until such time as HHS sounds the all clear.
Here’s Virologist Peter Piot, director of the London School of Hygiene & Tropical Medicine, in Science Magazine. He vividly describes the course of his COVID-19 illness at age 71. For society at large, we have few choices. Call a truce. Surrender now. Only a vaccine can save us. Until one arrives we are looking at social distance, shutdown, restart, shutdown, restart, test and test and track and trace. It’s high-tech medieval pandemic control for the foreseeable future, with all the economic and social upheaval.
https://www.sciencemag.org/news/2020/05/finally-virus-got-me-scientist-who-fought-ebola-and-hiv-reflects-facing-death-covid-19#
“Let’s be clear: Without a coronavirus vaccine, we will never be able to live normally again. The only real exit strategy from this crisis is a vaccine that can be rolled out worldwide…And despite the efforts, it is still not even certain that developing a COVID-19 vaccine is possible.”
The WHO is doing a great job. The problems of the CCP choosing their leadership in 2017 amount to administrative frou-frou that can be resolved through “truces.” He admires Nelson Mandela more than ever.
“And now that I have faced death, my tolerance levels for nonsense and bullshit have gone down even more than before.”
Here’s a good picture of Nancy Pelosi and Ed Markey in Beijing in May, 2009. We’re all on the high-speed train to Beijing now.
https://en.wikipedia.org/wiki/Ed_Markey#/media/File:Beijing-Tianjin_High_Speed_Train.jpg
“The WHO is doing a great job. The problems of the CCP choosing their leadership in 2017 amount to administrative frou-frou that can be resolved through “truces.” He admires Nelson Mandela more than ever.”
Well, perhaps the virus does damage brain cells sometimes.
“The WHO is doing a great job.”??? Because of the WHO recommendations we are all in lockdown around the world because of a virus with a mortality rate lower than a normal flu. And because of the WHO propaganda the scared people are hiding at home waiting for a corona vaccine. This is all wrong and the WHO is at the center of it. “The WHO is doing a great job.” Pfff
I don’t want to go back to “normal”. I want to enter a future where politicians and organizations who needlessly scare the public and make wrong decisions are held accountable.
Philip asked:
If coronashutdown is to protect the old, why do young people have to pay for it?
I believe a lot of programs work similarly. For example, Social Security is “pay as you go”, payments extract from today’s workers are fund the benefits paid to today’s retirees.
https://www.nasi.org/learn/socialsecurity/overview
> And since federal government tends not to repay debt, but merely roll it over and pay more interest, the younger the person the more he/she/ze/they will have to pay, right?
George Soros is in the news today reiterating his call for the EU to issue perpetual bonds (consols) at 0.5% to fund its €1 trillion European Recovery Fund! Maybe the United States could issue several trillion dollars in consols to fund its enormous payments.
https://www.independent.co.uk/news/business/comment/george-soros-coronavirus-interview-trump-eu-pandemic-a9508186.html
https://www.project-syndicate.org/commentary/finance-european-union-recovery-with-perpetual-bonds-by-george-soros-2020-04
His views on Donald Trump have improved!
“I will also say that I have put my faith in Trump to destroy himself, and he has exceeded my wildest expectations.”
“Without a coronavirus vaccine, we will never be able to live normally again. The only real exit strategy from this crisis is a vaccine that can be rolled out worldwide…”
This is just not true. The virus will kill most of those who are susceptible within 2-3 years. The rest will be immune by that point and herd immunity will be established. It is possible that it will mutate and we get a second wave, but very unlikely that it will continue to mutate and be just as deadly. By the end of next winter we will likely have seen the worst of it, if we aren’t already. And life will return to “normal.” At that point we may be close to an effective vaccine.
The economic devastation wrought by our response will be with us for much longer. The younger generations will assume the debt incurred. But the inflation soon to come will render social security income, pensions and the like worth much less than the boomers were expecting.
Deutsche Bank is now forecasting -40% US GDP for Q2 2020, -8% for the entire year, and GDP won’t recover to Q4 2019 levels until the end of 2023. Who wants to be the politician arguing for higher tax rates?
In late March they were characterizing -13% Q2 GDP as a “severe recession.”
https://www.businessinsider.com/us-economy-gdp-will-shrink-second-quarter-deutsche-bank-coronavirus-2020-5
If you’d like to scare yourself silly while working from home, you can keep up-to-the-second tabs on coronavirus news with this dashboard:
https://coronavirus.ravenpack.com/usa
The United States has the highest Media Coverage Index (percentage of all news sources covering the novel coronavirus) of any country they’re tracking at more than 76%, so we’re very good at watching our country go down the tubes.