Living with Risk Daily Briefing – March 27

Published on March 27, 2020 / Leer en español

Center for a New Economy

Edited by
Sergio M. Marxuach


Five things you should know today

1) Record-high increase in unemployment insurance claims

Initial unemployment insurance claims increased to 3,283,000 for the week ending March 21, an increase of 3,001,000 from the previous week total of 282,000, equivalent to 1,064%. According to the U.S. Department of Labor this is the largest increase in the history of the seasonally adjusted series. The previous high was 695,000 in October of 1982.

Source/Fuente: United States Department of Labor, CNN

This unprecedented increase was, in some ways, expected. Governors and local officials across the United States have imposed strict shelter in place policies in an attempt to slow down the COVID-19 infection rate. Thus, the increase in unemployment is a signal that those policies are working. It would be mistaken, though, to ignore the magnitude of the increase. During the Great Recession of 2008/09, which lasted six quarters (18 months), total job losses were approximately 8.8 million. Now consider this, the U.S. economy just lost 3 million jobs in one week. Furthermore, there are many things we just do not know at this point in time. For example, how long will the pandemic last? How many people will be infected? How many, unfortunately, will die? How many businesses will go bankrupt and how many will survive? What percentage of job losses will be temporary and how much permanent? The high level of uncertainty calls for a strong and timely federal response to the economic dimension of the crisis.

Read more: A record 3.3 million Americans filed for unemployment benefits as the coronavirus slams economy – The Washington Post

2) Additional details about the CARES Act

Rosanna Torres, Director of CNE’s Washington, DC office, provides additional details about the CARES Act:

Yesterday, the U.S. Senate unanimously passed a $2 trillion-dollar package that seeks to provide some relief for the economic effects caused by the COVID-19 pandemic. Shortly thereafter, Majority Leader Mitch McConnell adjourned the session until Monday, April 20, 2020.  The House is expected to consider the measure today (for more details see below). Speaker Nancy Pelosi and House Majority Leader Steny Hoyer are optimistic the bill will pass unanimously by voice vote. That was the expectation even before the United States surpassed China as the nation with the most confirmed coronavirus cases in the world, with more than 82,000 people infected.  Now, more than ever, time is really of the essence.

If the House were to propose amendments, as some members have suggested, the Senate would have to reconsider the new text and recommence the negotiation process, an unlikely scenario after a lengthy, politically-charged week.

Instead, it is expected the President will sign the bill into law and Americans — especially those who work in the service and hospitality industries, small businesses, and non-for-profits — will have access to relief aid. The bill provides direct individual cash payments, expands unemployment benefits, increases eligibility and scope of small business loans, responds to state and local needs, and addresses the shortages in health care equipment, among other things. Nonetheless, the largest spending package to date falls short of what will be required to meet the needs that will arise from this crisis.

For more details on what was included in the bill and what is still missing, read Rosanna’s in-depth analysis.

3) U.S. House of Representatives set to approve $2 trillion package today

Nancy Pelosi, Speaker of the U.S. House of Representatives, expects “strong bi-partisan support” in the House today for the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The CARES Act is neither a bailout nor really a stimulus package, rather it reads more like a disaster-relief bill. The Speaker also announced her intention to introduce follow-up legislation, focusing more on economic stimulus, soon. Given the recent increase in unemployment, that is very good news indeed, if we want to avoid a full-blown depression. According to Roll Call, her “wish-list” includes the following items:

  • “A better definition of who qualifies for family and medical leave;
  • Health care worker and pension protections;
  • Increasing SNAP benefits by 15 percent;
  • More funds to state and local governments;
  • Free coronavirus testing, doctor visits and follow-up treatment; and
  • Equitable funding for Washington, D.C., residents.”

Rosanna Torres will be monitoring further developments on any new economic stimulus legislation and we will keep you up to date as they occur.

4) COVID-19 in the U.S.: The curve is not flattening

Several states, including New York, California and Illinois, have imposed strong shelter-in-place policies to slow down the growth rate of the COVID-19 pandemic. Unfortunately, the infection curve in the United States is not flattening, at least not yet.

Source/Fuente: Financial Times

As shown on the chart above, made by the Financial Times using data from Johns Hopkins and other sources, as of March 25 the United States had the highest infection rate in the world. The news coming out from New York City have been particularly concerning. Officials from Elmhurst Hospital Center in Queens disclosed on March 24 that thirteen persons had died from COVID-19 at the hospital, a situation a doctor there described as “apocalyptic”. Meanwhile, nurses at Mt. Sinai reported that a severe shortage of personal protective equipment was forcing them to use trash bags to protect themselves. Unfortunately, one of those nurses has died. All of which leads to the conclusion that this is not the time to ease social distancing policies. As experts from Johns Hopkins have warned: “A premature return to business as usual could make transmission of the virus in the U.S. far more widespread…and amplify a surge of illness that threatens to overwhelm the nation’s health care capacity.”

5) Still flying blind in Puerto Rico

Meanwhile in Puerto Rico, the Health Department is still struggling to roll-out massive testing for the virus. Local public health officials have done the best they can with the limited data they have and should be commended for their efforts. However, it is not sufficient. Without adequate testing and data, it is impossible to determine whether the shelter-in-place policies implemented by Governor Vázquez are having any effect. Furthermore, the lack of testing hinders the allocation of scarce personal protection equipment and life-saving medical devices such as respirators. Finally, without more and better disclosure from the government it will be difficult to persuade the population of the necessity to keep sheltering in place.

Quote of the Day

“There is so much we do not know. Let us embrace, together, our humility—our willingness to admit what we have yet to discover.” 

—Peter Salovey, President of Yale University

Note from the editor

Public policymaking uses, even in the best of times, blunt instruments. It deals with aggregate figures, averages that hide significant fluctuations, and other similar macro data. A public health crisis calls for a more refined approach, which is possible to implement if the right people, equipment, and technology are in place at the time a crisis breaks. That largely explains why Singapore and South Korea have been so successful in addressing the COVID-19 pandemic.

If the United States had started testing for the virus back in late January or early February, it would probably have enough data by now to run epidemiological models to determine infection rates down to the zip code level. But it didn’t. Instead it chose to recklessly ignore the pandemic until recently and now is significantly behind the curve, literally.

Meanwhile, Puerto Rico was completely unprepared, and it was forced to implement a blunt policy to address the emergency. It appears to have been the right decision to make, but let us not fool ourselves. This was not the result of great strategic planning or some uncanny foresight. Rather, it was—in the words of Dean Acheson—just “dumb luck”, which is the phrase he used to describe how the world avoided nuclear war during the 1962 Cuban Missile Crisis.

The times also call for governments with the capacity to implement significantly complex policies. It is becoming clear that both the U.S. and Puerto Rico will have to implement complicated public policies simultaneously along two tracks. First, state and local officials have to keep pushing social distancing and shelter in place policies. Again, it’s quite a blunt tool, with high social and economic costs, but it is too late for anything else.

These policies have, and will continue to, put a brake on economic activity. Hence the need for track two. The federal government is already implementing monetary and fiscal policies to partially ameliorate the economic effects of the pandemic. But more will be needed. When the infection curve finally peaks, state and local governments will need to gradually ease their shelter-in-place policies and the federal government will really need to go big with economic stimulus. Let’s hope governments at the federal, state, and local levels can pull off this difficult policy balancing act.

This is the end of today’s briefing.
Stay safe and well informed!