1. Ron Shevlin promotes the overdraft protection/credit line idea in Forbes. (I find it hard to load the ad-heavy page)

2. A video podcast with Bill Walton and me. I thought it was a very good opportunity to express my views on the virus crisis.

He writes,

Without decent epidemiological data any public health policy with an eye on containment or mitigation is simply a shot in the dark. Unfortunately, materials, equipment and lab bottlenecks have made testing numbers plateau at this level. Multi-day delays in receiving test results are widespread.

. . .The United States will be the country that has suffered the greatest recorded deaths from coronavirus within two weeks, and the death toll certainly will not peak within a week of that dire landmark.

Yesterday, the White House briefing gave out a forecast for a range of deaths between 100,000 and 240,000. With a population of 330 million, this works out to a death rate per million of 300 to 720. Just for benchmarks, Italy and Spain are currently at 200 deaths per million. New York state is at 80. All other U.S. states and major countries are below those numbers. But to be clear, I don’t find those benchmarks helpful in forecasting going forward.

Currently, for our nation as a whole the number of deaths per million stands at 12. To stay within the White House range, the number of deaths must double either 5 or 6 more times. If it only doubles 4 times, then we fall below the range. More than 6 times, and deaths will exceed the upper end of that range.

Most recently, the rate has been doubling every three days. How much would you want to bet on a forecast that between now and the end of the year it will double no less than 5 times and no more than 6 times? The people who are trying to issue forecasts, including the sainted Dr. Fauci, come across to me as fools. He may get lucky. But if you held a gun to my head and made me forecast, then I would give a wider range, particularly at the upper end.

John Hinderaker writes,

I am particularly interested in the IHME project because it includes state-by-state forecasts. For Minnesota, it currently projects 1,039 deaths. This is in marked contrast with the model on which Minnesota’s governor claims to have relied when he issued the state’s shutdown order. That model, according to the governor, projected more than 70,000 deaths in the state unless people were ordered to stay home and businesses were closed. He hasn’t said, to my knowledge, how much good his stay-home order will do, according to the same model.

I have a distrust of computer models that goes back a long time. Coincidentally, today the latest issue of EconJournalWatch is out, including my piece on why Edward Leamer, a skeptic of econometric models, deserves the Nobel Prize. I’ll say more about that in a post later this week.

It amazes me that people trust computer models as much as they do. Have they forgotten how computer models performed in rating mortgage securities prior to the financial crisis of 2008?

I would prefer to base decisions on experiments, not on models. For example, on the utility of masks, I think that the best evidence we have is the quasi-experiment of Hong Kong and Taiwan vs. Europe and the U.S. But I would be happy to see an experiment in which similar communities adopt different approaches, with one of approach being the lockdown and another approach being allowing people to go to work and school wearing masks.

As you know, I would like to see experiments performed to see how the virus spreads (testing the “doorknob effect,” for example), And a careful study of a random sample of the population to try to get a handle of how many people have the virus currently and how many people have had the virus.

Ross Douthat has a column on the way ideology influenced pundits’ reactions to the virus crisis.

Along with infectious-disease specialists, the people who seemed most alarmed by the virus included the inhabitants of Weird Right-Wing Twitter (a collection of mordant, mostly anonymous accounts interested in civilizational decline), various Silicon Valley eccentrics, plus original-MAGA figures like Mike Cernovich and Steve Bannon. . .

Meanwhile, liberal officialdom and its media appendages were more likely to play down the threat, out of fear of giving aid and comfort to sinophobia or populism. This period was the high-water mark of “it’s just the flu” reassurances in liberal outlets, of pious critiques of Donald Trump’s travel restrictions, of deceptive public-health propaganda about how masks don’t work, of lectures from the head of the World Health Organization about how “the greatest enemy we face is not the virus itself; it’s the stigma that turns us against each other.”

. . .The fact that the virus seemed poised to help Democrats and hurt the Trump administration, the fact that it was being hyped by CNN and played down by Hannity, the fact that Trump himself declined to take it seriously — all of this mattered more to many Republicans than the fear of foreign contamination that the virus theoretically should have activated

As you might remember, my wife and I started our stay-at-home policy on March 12. So I was hardly the first person to take the virus seriously, but I was ahead of many people, especially elected officials. At that point, I did not have an ideological axe to grind.

On March 21, when I wrote my virus economics FAQ, I was trying to explain why the virus crisis posed a problem for individualism. That is, many people would tend to want to go out and not take into account the risk that they could infect others.

In the last several days, I have become less receptive to what government is doing. I remain committed to taking the virus seriously. But I have very low confidence in the health “experts.” Instead, of carefully experimenting and learning, they are flailing–“tampering,” as quality control guru W. Edwards Deming used to refer to it. And my confidence in mainstream macroeconomists and their remedies, which was never high before the crisis, is even lower now.

I would like to see an effective libertarian opposition to current policies. But that is difficult for me to jump-start, in part because some libertarians seem committed to a version of virus denialism that I do not share. Meanwhile, others on the right (I hesitate to call them libertarians) seem to be driven primarily by pro-Trump (or anti-Democrat) partisanship. Rather than fight the “stimulus,” they spent their energy denouncing Speaker Pelosi for temporarily obstructing it.

The number of mouths trying to get attention exceeds the capacity of available ears. As another libertarian pointed out to me, even the presumptive Democratic Presidential nominee has trouble getting noticed these days.

I have reached the point where I am afraid that we are permanently losing our way of life. When government obtains new powers in a crisis, it does not relinquish them. When the Fed is going to have power to control more capital than all of the bank loans and corporate bonds combined, that is going to make the American economy like the Chinese economy, where the government also acts as the central source of credit. On the fiscal front, we may never again see Federal government is taking on a share of the economy not seen since World War II, starting from a higher debt level than we ended the war with, and with no thought whatsoever of future fiscal austerity.

I disagree with the elite consensus in two ways. First, I do not think that we should rely so heavily on the stay-at-home strategy and we ought to at least in some region try the masks-and-scarves strategy. Second, I think that the “stimulus” is misguided. At the very least, the government should have a plan to undo the increase in debt and a plan to unwind the huge Fed balance sheet.

If we are going to get off this disastrous course, people who agree with me will have to be heard. My thought is to try to start some sort of discussion about how to do this.

President Trump and his virus task force seem to give daily briefings. I would like to see citizens get together, say on Zoom, to give their own briefings. Call this idea Citizens’ Daily Briefings.

My dream is that eventually every day there would be several thousand different online meetings, each with a few dozen participants, discussing these issues and coming up with ways to pressure the elites to change course. You can think of this as a modern version of Committees of Correspondence.

I would like to hear comments from anyone who would like to see this idea work. I know what I am proposing is difficult to execute and likely to fail. It may not be desirable to try. But I don’t need to hear any of that. Negative, hostile, and snarky comments are not welcome. If you don’t buy into the spirit of the idea, just keep silent.

UPDATE: at 6:30 pm eastern time today, March 31. Meeting id 824-584-0623. Going to try a Zoom meeting. A learning experience.

Amit Seru and Luigi Zingales write,

The need to help individuals and small firms has provided cover to the largest corporate subsidy program in U.S. history. Under intense pressure from lobbyists, the Cares Act allocates $510 billion to support loans for large businesses. A small chunk of this money ($56 billion) will be used directly by the Treasury to grant loans to airlines and other “strategic” firms (read: Boeing). The Treasury will then confer the rest ($454 billion) to the Federal Reserve to absorb losses the Fed might incur in lending to firms in the private sector.

The expectation is that the central bank will leverage this money 10 to 1, enabling it to lend up to $4.54 trillion to companies. That sum is more than all U.S. commercial and industrial loans outstanding at the end of 2019 ($2.35 trillion) plus all the new corporate bonds issued during 2019 ($1.41 trillion). Thus, if this capital is all deployed by the Fed, and at rates that will surely crowd out private capital, all capital allocation in the U.S. in 2020 will be done by the Federal Reserve System, not by the capital market.

Their recommendation is for more transparency and oversight. Really? Our country has switched to an economic system somewhere to the left of Bernie and barely to the right of Lenin, and you would be satisfied with transparency and oversight?

I applaud Seru and Zingales for coming forward to point out the radicalism in the CARES act. But it requires a more radical response.

A commenter asks,

With plan B the taxes happen sooner. With plan K the taxes happen later. We will scramble to produce output to pay those taxes later so the difference between B and K is just the timing of taxes. Apparently you don’t agree so I’m asking why?

Because no one will vote for the necessary tax increases. Look, they could do it now if they wanted to. They are spending 50 percent more in 2020 than they did last year. They could enact tax increases to go into effect in 2021 and later to pay for that spending. But they won’t. That’s even assuming that an increase in tax rates would actually work to increase revenues, which is no sure thing.

After World War II, we restored fiscal health with economic growth and Dwight Eisenhower. Economic growth meant that even though tax rates were not increased to pay off the debt, tax revenues went up.

Because we were willing to cut government spending from its wartime levels, and because Eisenhower had old-fashioned values about fiscal responsibility, for more than a decade we ran what economists call primary surpluses. The primary surplus is the government deficit if you do not include interest payments. If interest payments are $50 and the deficit $80 $20 (good catch by a commenter0, then the primary surplus is $30. If you keep running a primary surplus long enough, the interest payments keep falling until you no longer have a deficit. It’s like if you keep paying off some of the principal on your credit card, eventually you get out of debt.

But in case you haven’t noticed, Dwight Eisenhower is no longer President. We aren’t running primary surpluses, and we are not going to. We had some nice economic growth in the 1990s, and it took a while for Washington politicians to catch on, so the fiscal situation improved for a couple years. We had some slow economic growth from 2011-2019, and even though the Obama and Trump Administrations outspent the resulting increases in tax revenues, the Federal debt increased only gradually.

And now we have that 50 percent increase in spending. With more to come, probably. And no tax increases.

10 percent of GDP here, 10 percent of GDP there, and soon you are talking about real money. Of course I could turn out to be wrong, but I think this time we will catch the inflation virus.

Written by Scott Gottlieb and others. They call it a road map to reopening, and it includes various benchmarks and milestones that might be used in deciding when to lighten up on the shut-downs. Pointer from Yuval Levin.

My main quibble with it is that I think that we should at least try a “masks and scarves” strategy in one city and compare it with the “shut down the economy” strategy in a comparable city. Although the report recommends using masks or face-covering fabric, it does not consider that this might substitute for strangling local economies.

[UPDATE: You want to object, “We can’t experiment with people’s lives in a crisis!” My response is that we are doing exactly that. We are experimenting with various lockdown policies, but not in a way that allows us to learn from the results. ]

For the future, the report recommends,

The COVID-19 pandemic has exposed serious gaps in our nation’s pandemic preparedness. COVID-19 will not be the last public-health emergency to threaten American society. We must invest in the scientific, public-health, and medical infrastructure needed to prevent, detect, and respond to the next infectious disease threat.

. . .We need to move away from a decentralized system that promotes unequal implementation of preparedness measures across the nation and toward more coordinated execution of response. . .Preparedness for public-health emergencies should be elevated as a function in the White House, with a coordinating function analogous to the director of national intelligence.

I fear that this is exactly what will happen. But it embodies a form of the Nirvana Fallacy, in which a big spending spree and consolidating power in a central agency are presumed to work. Some points to consider:

1. We already have a CDC, and it failed at its One Job. It may have done more harm than good, by trying to monopolize testing and by recommending against people wearing masks.

2. After 9/11, we created the TSA. Do we think that was cost effective? Remember to include the lost time for passengers. Plus the inconvenience and the effort it takes to implement workarounds for the restrictions on liquids.

We are in a Robert Higgs Crisis and Leviathan moment. Government officials always say in a crisis “We need more power.” They never relinquish it. Look at where the Fed’s balance sheet stood ten years after the “emergency” of 2008. It had not even come close to shrinking back toward its pre-crisis level. And now, of course, it will grow by another order of magnitude.

We have increased government spending by roughly 50 percent over last year. What do we expect to happen in 2021?

a) We go back to the old baseline level of spending.

b) We cut spending below the old baseline, as part of the process of restoring fiscal health.

c) We continued to spend about 50 percent more than the old baseline.

You and I both know that the answer is (c). Keynesians will be warning us that any “cuts” in spending will cause a recession. And politicians, having increased their ability to conspicuously bestow funds on various constituents, will not relinquish their enhanced control over resources.