They say a crisis is too good a thing to waste. Crises create opportunities to learn. Crises are like natural experiments, that is, real-life situations we cannot replicate for the sake of research because of the high cost or because we cannot design with high degree of authenticity. The coronavirus pandemic is a devastating calamity but one that also comes with some valuable teaching moments.
Government matters. Ronald Reagan and Margaret Thatcher became the heroes of conservative politics and thought by declaring that “government is the problem not the solution.” The experience of the last forty years teaches us the opposite. When governments retreat infrastructure decays, social problems flare up and crises take a heavier toll, human and economic. Government has not been invented by people as a parasite of the private sector. It exists because it has a crucial and unique role to play. Adam Smith’s profit motive can take us so far in meeting our needs. At the end of that road it is only the government that can pick up the task of providing for the rest of our needs.
Take the case of hospital beds in the US. We currently have 2.8 beds per 1,000 persons, much below what is available in other advanced countries. This may make sense as a cost containment solution at the level of each hospital system. But it doesn’t from a public policy standpoint in cases of health emergencies. Think of this. The US has more beds for its inmate population (about 2.3 million) than it has to take care of its sick people in a case of a pandemic like this one. Not to mention, of course, the deficit in other medical equipment.
We need to understand that the government and public sectors have distinct priorities and missions. The bias in favor of private sector solutions and less government has brought us to where we are now and will continue to be the root cause of future failures.
Preparedness matters. The lack of preparedness and quick response to the coronavirus pandemic in the US is a direct consequence of the mantra “a smaller government is a better government.” We now find the hard way that fighting a tiny virus requires a really big government. Assigning a secondary role to government to address local and national problems translates into less monetary, administrative and professional resources and, hence, delayed and inadequate responses. There is no way we can sugarcoat the current inadequacy of tactical and strategic planning on part of the federal government to face this crisis. A country that is obsessed with all kinds of statistics and data cannot gain a reliable knowledge of the extent of the pandemic because of our failure to test in big numbers. * We have failed to measure and count the one thing that right now matters the most for how we plan our economic and medical response to the crisis.
Fiscal responsibility matters. When the government passed the $1.5 trillion tax law in 2017 amidst a period of economic growth and falling unemployment, wiser voices warned that we were over-straining the debt capacity of the country and leaving very little room to fight the next economic crisis. As predicted by experts outside the Administration, the last three years annual fiscal deficits have ballooned to $1 trillion and the national debt has climbed by a similar magnitude. And now the chicken has come home to roost. The additional $2 trillion (and most likely much more) of debt we have to assume finds our national finances without any slack for more debt. The money that is truly needed now will bring the indebtedness of the federal government to unprecedented heights for a peace time economy. Who will pay? (See below.)
Economic inequality matters. Prior to the coronavirus crisis we were told that we have a thriving economy. But for whom? First, let’s state the fact that average GDP growth has not exceeded in any significant order that of the pre-2017 years, let alone the President’s uninformed assurances for growth much higher than 3%. Instead the tax cuts created additional deficits and debt with the vast bulk of the benefits in after-tax income and stock market gains going to the top 1 to 10%. Despite a very low unemployment, significant segments of American families are exposed to financial fragility. Forty percent of Americans do not have more than $400 to spare in an emergency and credit card delinquencies among young Americans are rising. Average savings in 401K plans are also woefully low for the size and growth record of the American economy. ** What does this terribly skewed distribution of incomes and wealth mean? It means that this supposedly thriving economy does not have the capacity at the household level to endure a dislocation of jobs and money in times of crises. As a result, we need much larger stop gap rescue measures, as now, to avert the economic collapse of households. So here is the shortsightedness of the trickle-down theory. It prefers to create immense wealth for the few instead of economically empowering all citizens so they can become better masters of their economic fate. Ironically, the conservatives’ trickle-down theory betrays the spirit of individual independence they espouse by creating what amounts to a modern-day type of economic serfdom by keeping large numbers of Americans in a perpetual state of financial fragility. ***
Who pays matters. Who do we think will pay for the exploding fiscal deficits and debt? Our children and their children and grandchildren, of course. And we know why. Because over thirty years the effective tax rates on high and very high incomes has declined without producing enough economic growth to sustain or boost tax revenues. This has left the federal and state governments with fewer fiscal resources to prepare us for emergencies and minimal capacity to absorb economic shocks without resorting to extreme fiscal measures. If we have any sense of fairness and social solidarity, Congress should soon adopt legislation to impose a tax surcharge on high incomes and later undertake a radical restructuring of the tax code to restore robust funding of the government so it can do its own job, the job the private sector is not designed to deliver.
The ultimate lesson in a crisis is that’s when a nation needs a leader. A leader who accepts responsibility, displays humility before the enormity of the challenge, shows compassion, knows how to inspire the people, and gives hope based on facts, reason, and the resoluteness of the human spirit. I wish I had that leader.
* As of March 25, the number of tests in the US stood at 418,810 whereas it stood at 357,896 in South Korea. South Korea has a population of 51 million people compared to 330 million in the US. Therefore, on a per person basis, the US is behind by an order of 6. And, of course, it took longer for us to ramp up testing than it took for So. Korea. Without extensive testing, we cannot plan our way out.
** The financial fragility or state of American households has been tracked by the Federal Reserve since 2013.
*** If the word “serfdom” bothers anyone, I suggest reading the main editorial of today’s (March 27, 2020) NYT that describes how several European countries are handling the crisis-induced unemployment. Instead of boosting unemployment benefits, these countries committed to compensate firms for keeping their employees on the rolls. It is much more dignified, and eventually productive, to keep people employed than laying them off.
Let's Reason 
Right on, George. The big tax cut paid for companies to buy back shares and give out bonuses. At least the current bill does both help out unemployment insurance and comapnies that keep their workers employed.
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As reflected in the president’s press conference this evening (3/27/20), the president apparently read this article earlier today and recognized the truth of its philosophic tenets.
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