The premise of this post is simple: The future is going to look different than the past, and maybe a lot different. It’s possible that things will go more-or-less back to normal once this pandemic ends, but I suspect there will be many changes, some good and perhaps some not. It’s even possible that this pandemic, and our response to it, could engender a global politico-economic reset on par with what was experienced after the Great Depression and World War II. Probably not, but it’s not impossible.
Health and Healthcare Reform
A few positive outcomes from this pandemic might include the following: First, that we need to better prepare for future pandemics
This pandemic has continued to expose our healthcare disparities, and it’s past time we address them. I’ve spoken and written on healthcare reform extensively in the past, and will likely do more in the future, so won’t go into further detail here. To disappoint my progressive friends, I don’t support a Medicare For All option, for three reasons. First, I don’t think it’s going to be as effective at reducing prices and improving outcomes as you might like. Second, I believe our healthcare industry is so entrenched in the halls of Congress that it will resist all such efforts; and if those efforts fail, will co-opt any legislation for their own benefit. Third, I simply don’t think it is politically possible to accomplish at this time, even if my first two objections were overcome.
But, I do think we need to pursue a universal healthcare plan in America. I’d just favor one based more upon Switzerland or Singapore, rather than the U.K. or Canada. I’ll return to this topic again in the future. For now, you can do your own research and tell me why I’m wrong.
Why do I think we’re likely to see major changes? There are three main reasons.
First, this virus remains a largely unknown entity. We don’t yet know its true infectivity rate, its actual mortality rate, how many people have already been infected, whether prior infection generates a long-lasting immune response, when or if an effective vaccine will be developed, or how long this virus will be with us in the absence of a vaccine.
Second, our response to this virus is unparalleled. This is not due only to government edicts like school closures and shelter-in-place orders, but also to voluntary decisions made on a day-by-day basis by concerned people worldwide. Furthermore, fiscal and monetary actions by Congress and the Federal Reserve in the past few months easily dwarf the those made in response to the Great Recession of 2007-2008.
Third, the economic, cultural, and political ramifications of our responses are as yet completely unknown, but the early returns I find concerning.
My suspicion is that this novel coronavirus will be with us for quite a long time, and the direct and indirect effects of our responses to it will linger even longer. What changes might we expect? Which changes might we hope for? And, which changes might we have cause to fear?
One of the best part of the CARES Act, passed by Congress back in March, was the expansion of unemployment benefits, and extending benefits to those who are not normally covered (the self-employed, contractors, and gig workers). While there is always a reasonable concern creating a disincentive to work with such programs, the positives outweigh the negatives, in my opinion. Employment insurance is one of the best economic stabilizers we have. It kicks in automatically, not depending upon the typically tardy reactions of lawmakers, and expands and contracts as the economy worsens or improves.
One near-term concern with employment is that this pandemic seems likely to adversely affect the most vulnerable members of our society. Most people in the lower economic classes don’t have the luxury of working from home, or passing up work entirely for a spell, and so will be more exposed to the virus. These people tend to have higher incidences of other illnesses, which generally puts them at higher risk in the face of infectious diseases, than those who are healthier. They are also at higher risk of economic hardships, due to decreased work opportunities as well as illness from COVID-19.
Millions of schoolchildren, and their parents, have been suddenly introduced to homeschooling. I expect we will see a modest boost in the number of homeschooled children following this pandemic, but most will return to a physical school. In the short term, expect more physical distancing, more widely-spaced desks, possibly smaller classroom sizes, and more widely available hand sanitizer.
If school shutdowns continue only for a short time, such as through the end of this school year, this shouldn’t create too much of a problem. But, if continued for a prolonged time, children will suffer, not only from a less effective educational environment, but also from reduced socialization and increased stress at home. And, as with employment, it is children from lower-income households who will be most adversely affected.
From what we have seen thus far, COVID-19 appears to be most dangerous to the elderly and infirm, and not to younger and healthier cohorts, to include most schoolchildren. This is a pattern typical to most influenza outbreaks, so it should not be surprising. If these early observations prove to be true over time, I hope we will see our children return to the classroom in the next school year.
Our youngest son, Caleb, will have a truncated senior year of high school this year. I don’t think it’ll affect him much; and, I recall having “senioritis” for my last few months of high school, during which I didn’t much care whether I was present, or not. But, Caleb will be heading to college next year, and missing out on your first year of in-person college would be sad.
Speaking of college, I’m interested to see the possible impacts of this pandemic on higher education. Given all the concerns about rising prices for college, will this experience open up some areas for potential reform? Brick-and-mortar institutions won’t go away, but the past few months may pave the way for more online education in the future. Particularly for some classes, such as large auditorium lectures, a video lecture would probably work just as well. For other classes, such as science labs, a physical environment would still be needed. I expect a boost in community college enrollment, reversing a declining trend over the past decade, and also a rise in online-only or hybrid educational options.
Debt and Money
It hasn’t been fashionable to discuss debts and deficits recently, at least since Democrats were last in control of our federal government, but they remain a concern of mine. As of this writing, we are nearing $25 trillion in total U.S. debt. Debt-to-GDP ratio is nearing 120%, which is comparable to our previous all-time-high of 121% in 1946, after World War II.
Debt levels this high can impede economic growth and increase the risk of a sovereign debt crisis. But, America is in a unique position, with the largest overall economy in the world (for now), and still enjoying special status with the USD as the reserve currency for most of the world. And, governments in other developed counties have also increased their debt levels, first in response to the Great Recession, and now in response to COVID-19. So, in a very real sense, we are not the ugliest in a global ugly contest.
But, there are limits, or so I think. Thus far, despite dramatic increases in our money supply through measures such as quantitative easing during the Great Recession and direct payments to businesses and citizens during COVID-19, we haven’t yet seen any rise in inflation. This would seem to lend support to the proponents of Modern Monetary Theory (MMT), who argue that sovereign nations like the U.S. need not be confined by revenue generation (taxation), and can therefore “print” money as needed.
Color me skeptical, but I think we have reason to worry. I’m less concerned about a sovereign debt default in the near term, but I do believe that inflation is a real concern. Just since the beginning of COVID-19, our M2 (a measure of money supply), has increased from over $15 trillion in January to over $18 trillion today. Too much money chasing too few goods leads to price inflation. In the words of Milton Friedman:
“Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”
I lived through the inflation of 1970s and 1980s, and really don’t look forward to doing so, again. But, if such comes to pass, I hope, likely in vain, that people will not blame the current President, or the last one; or the current Congress, or the one prior. Rather, it will be the fault of multiple administrations and legislatures, dating back to the mid-1970s and nearly every year since, regardless of which party was in power.
On a somewhat related note, a friend of mine pointed out that while we (and most other countries) are signatories to the U.N. Biological Weapons Convention, which prohibits the development or stockpiling of biological weapons, there exists no compliance or verification mechanism. We have such for nuclear weapons, and although admittedly it might not be perfect, it’s better than nothing. I include this not because I believe this coronavirus is a product of the virology lab in Wuhan, but simply because it seems like a common sense idea.