Giving up on the economy, and the virus too!

Attention Romanians: Can someone explain to me why this blog has received three huge spikes of hits (about 900) from your country in the past three weeks? The hits all arrive within one hour – and in between spikes there is no discernible traffic from your country. The hits have arrived at an interval of about once a week, although they skipped that a week ago (national holiday, perhaps?). This is very baffling, since it hardly seems that Romanians are enamored with this blog, which other than these spikes gets close to 100% of its traffic from the US and Canada.

The US finds itself in an unprecedented political situation now: It seems like the executive branch has not only given up on fighting Covid-19, but it seems the legislative branch has given up on fighting the deep recession we’re in. I won’t try to tie all of this together, but here are some of the very unusual features of what’s going on:

1.      There is no question that the US economy needs lots of help. For one thing, Federal Reserve Board Chairman Jerome Powell has been saying for months that the economy needs massive assistance, and he isn’t at all worried about inflation or interest rates spiking in response to the borrowing that will be required to fund that (as indeed he shouldn’t be).

2.      The House, controlled by Democrats, passed a $3.4 trillion relief bill in May that included a) extension of the $600/week supplemental unemployment benefit through January; b) about $1 trillion for states and cities to help them deal with the pandemic and not resort to large-scale layoffs, as they will soon have to do; c) about $150 billion in aid to schools to help them reopen safely; and d) funding to greatly step up the testing and contact tracing that are required to finally get the virus under control – as well as other measures.

3.      Sen. Mitch McConnell in return promised that the GOP-controlled Senate wouldn’t even start thinking about a new bill until the end of July, even though the supplemental unemployment benefits were set to expire on August 1. Always true to his word, he didn’t even propose an alternative bill until last Monday. It contained a $200/week supplemental benefit, a much smaller amount for schools, and $150 billion in state/local government aid (even though the administration made it clear months ago that they’re responsible for fighting the coronavirus, including paying for the great majority of the measures needed to do so). It amounted to about $1 trillion. McConnell said the big concern of the GOP was that people were being paid more to remain unemployed than they would receive from going back to work, which is a potent GOP fairy tale. But Mitch wasn’t completely unhelpful: His bill protected employers from lawsuits over Covid infections in the workplace, with no move at all to actually require employers to make those workplaces safer!

4.      However, as soon as McConnell introduced the bill – which had been negotiated with the White House – Trump immediately made clear that he didn’t think much of it. He didn’t think the supplemental unemployment benefit was needed at all, and instead the payroll tax should be eliminated (and since the payroll tax supports Medicare and Social Security, this means the trust funds that support both of those programs will be depleted at a much faster rate). While that might be a good measure if the economy were close to full employment (and it could be offset with increases in other taxes), it makes no sense at all when 30 million Americans are unemployed, since obviously people who aren’t on a payroll aren’t going to benefit from eliminating that tax. Both parties in Congress were fairly united in opposing that measure at this time.

5.      At that point, McConnell gave up, since he’s caught between three stools: a) A group of GOP Senators doesn’t want to spend another dime on coronavirus relief, period; b) Another group of GOP Senators, especially those up for re-election in November, sees the lack of government action – especially greatly reducing or eliminating the supplemental unemployment benefit – as the death knell for their already tenuous hopes of retaining their seats; and c) Donald Trump and Chief of Staff Mark Meadows, a Tea Party Congressman who became famous for opposing any legislation at all – just the person you want to be in charge of dealing with Congress.

6.      Negotiations opened last week – almost three months after the House passed their bill and sent it to the Senate – with Meadows and Treasury Sec. Mnuchin leading the negotiations with Speaker of the House Nancy Pelosi and Senate Minority leader Schumer. McConnell wasn’t at the table, nor was any other GOP Senator. They wouldn’t budge very much from the bill McConnell introduced, and ended up around $1.3 trillion in their final offer. Meanwhile, the Democrats had come down from $3.4 trillion to $2 trillion in the hopes the Republicans would meet them there. That was a forlorn hope.

7.      Yesterday Trump signed four Executive Orders that a) Set the supplemental unemployment benefit at $400 a week ($100 of that would have to come from the states, something that's very unlikely to happen), although this is clearly an unconstitutional infringement of Congress’ power to approve any spending requests and won’t withstand a court challenge; b) Provide no additional aid to state and local governments or schools at all; c) Don’t provide any more money for fighting the coronavirus or for the CDC (the Democratic bill had about $70 billion for the former and $10 billion for the latter, I believe); d) Try to extend the current eviction moratorium but don’t provide any aid to hard-hit renters, meaning they will continue to owe their rents; e) Delay payroll-tax liability to the end of the year, but don’t eliminate the tax itself (which, again, only Congress can do); f) Provide no new $1,200-per-person payments to adults, which was included in the House bill and had broad support in the GOP as well; and g) Don’t extend the Paycheck Protection Program for small businesses, which was widely supported by all businesses (the PPP expired yesterday).

8.      So it’s inevitable that the economy will continue to deteriorate, at probably an accelerating rate. 1.8 million jobs were added in July, down from 4.8 or so in June, yet even if job growth continues at that level, it will be 2027 before the economy returns to the level of employment reached before the pandemic hit. But it’s highly unlikely that even the 1.8 million rate can be sustained, since the purchasing power of the $600/week supplemental employment benefit – which was almost entirely spent on necessities, as opposed to being saved – will disappear, throwing a lot of unemployed people into poverty for the first time.

9.      The irony of all of this is that the votes are definitely there in the Senate for a robust bill like the Democrats proposed – it would just require the support of about three Republican Senators, along with all the Democratic Senators. But this would require the administration to reach a deal with the Democrats on terms other than unconditional surrender, which has been Trump’s only approach to dealing with Democrats (it turns out the supposed great real estate deal maker doesn’t know the first thing about negotiation. Who would have thought?). And that didn’t happen.

Will it happen? I used to think that at some point McConnell and his friends would realize that what’s good for Americans’ health is also good for the economy: getting the virus under control and supporting Americans who have lost jobs due to this effort; and when McConnell made it clear to the White House that they had to change their tune or lose all Congressional support, Trump would be forced to actually do his job. But now McConnell has gone into a corner to sulk and declare a pox upon both Houses (the House of Representatives and the White House). Maybe something will give, but I’m no longer sure it will happen.

The numbers

These numbers are updated every day, based on reported US Covid-19 deaths the day before (taken from the Worldometers.info site, where I’ve been getting my numbers all along). No other variables go into the projected numbers – they are all projections based on yesterday’s 7-day rate of increase in total Covid-19 deaths, which was 5%.

Note that the “accuracy” of the projected numbers diminishes greatly after 3-4 weeks. This is because, up until 3-4 weeks, deaths could in theory be predicted very accurately, if one knew the real number of cases. In other words, the people who are going to die in the next 3-4 weeks of Covid-19 are already sick with the disease, even though they may not know it yet. But this means that the trend in deaths should be some indicator of the level of infection 3-4 weeks previous.

However, once we get beyond 3-4 weeks, deaths become more and more dependent on policies and practices that are put in place – or removed, as is more the case nowadays - after today (as well as other factors like the widespread availability of an effective treatment, if not a real “cure”). Yet I still think there’s value in just trending out the current rate of increase in deaths, since it gives some indication of what will happen in the near term if there are no significant intervening changes.

Week ending	Deaths reported during week/month	Avg. deaths per day during week/month	Deaths as percentage of previous month’s
March 7	18	3
March 14	38	5
March 21	244	35
March 28	1,928	275
Month of March	4,058	131
April 4	6,225	889
April 11	12,126	1,732
April 18	18,434	2,633
April 25	15,251	2,179
Month of April	59,812	1,994	1,474%
May 2	13,183	1,883
May 9	12,592	1,799
May 16	10,073	1,439
May 23	8,570	1,224
May 30	6,874	982
Month of May	42,327	1,365	71%
June 6	6,544	935
June 13	5,427	775
June 20	4,457	637
June 27	6,167	881
Month of June	23,925	798	57%
July 4	4,166	595
July 11	5,087	727
July 18	5,476	782
July 25	6,971	996
Month of July	26,649	860	111%
August 1	8,069	1,153
August 8	7,153	1,022
August 15	7,477	1,068
August 22	7,816	1,117
August 29	8,170	1,167
Month of August	33,014	1,065	124%
Total March – August	189,785

Red = projected numbers

I. Total deaths

Total US deaths as of yesterday: 165,074

Deaths reported yesterday: 935

Yesterday’s 7-day rate of increase in total deaths: 5% (This number is used to project deaths in the table above; it was 5% two days ago. There is a 7-day cycle in the reported deaths numbers, caused by lack of reporting over the weekends from closed state offices. So this is the only reliable indicator of a trend in deaths, not the three-day percent increase I used to focus on, and certainly not the one-day percent increase, which mainly reflects where we are in the 7-day cycle).

II. Total reported cases

Total US reported cases: 5,150,060

Increase in reported cases since previous day: 52,873

Percent increase in reported cases since 7 days previous: 8%  

III. Deaths as a percentage of closed cases so far in the US:

Total Recoveries in US as of yesterday: 2,638,673

Total Deaths as of yesterday: 165,074

Deaths so far as percentage of closed cases (=deaths + recoveries): 6%

For a discussion of what this number means – and why it’s so important – see this post. Short answer: If this percentage declines, that’s good. It’s been steadily declining since a high of 41% at the end of March. But a good number would be 2%, like South Korea’s. An OK number would be 4%, like China’s.

I would love to hear any comments or questions you have on this post. Drop me an email at tom@tomalrich.com