Covid-19 fight will bring inflation, higher taxes

Gordon L. Weil

Fighting the health and economic impacts of Covid-19 costs a lot of money.

The government has pumped out trillions of dollars to support urgent health care and to help people and companies survive the loss of jobs and business activity. Spending and lending at this level has never happened before.

These massive outlays result from the lessons learned in both the Great Depression of the 1930s and the Great Recession, a dozen years ago. Previously, Congress had reacted slowly and with too little financial support for the economy. The Federal Reserve played only a small role, at least at first.

Recovery from the Depression took more than a decade and was ended by massive spending for World War II. Recession recovery dragged on almost as long. In both cases, spending was limited by Republican opposition to increasing the federal debt.

With strong bipartisan support, Congress has passed four rescue bills with a $3 trillion price tag. Aid is supposed to cover some personal and business income losses until the economy opens again. No money was raised to cover its cost.

Before this virus spending, the federal government was on track to run a $1 trillion deficit this year. With the virus outlays, deficit spending could push the federal debt to nearly $22 trillion. That's a new record.

That debt will have to be repaid. Government tax revenues will decline during the crisis, and taxes cannot be raised now, so the added debt will not be offset by revenues. It will keep growing, but must be paid off by future government revenues.

Some critics say we should not be overly worried. Interest rates are close to zero, so the debt will grow only slowly as unpaid interest is added to the debt over time.

They have also come up with an optimistic way of looking at the size of the federal debt. If you measure debt against the size of the economy, it does not look so bad, especially if the economy grows faster than the debt. Future prosperity could pay today's bills.

That was the theory behind the big GOP tax cut in 2017. Of course, it would raise the deficit, the annual budget shortfall and debt, the total amount government owed. But the reduction would encourage growth, which in turn would produce the tax revenues to more than offset the shortfall caused by the cut.

It didn't work. Even before the Covid-19 crisis, new tax revenues did not come close to covering their cost.

The GOP had traditionally accused the Democrats of “tax-and-spend” policies and creating deficits. Once in power, Republicans warmed to increased outlays and adopted “borrow-and-spend” policies. Using debt, they even had room to lower taxes. And most Republicans abandoned their dislike of deficits.

Debt may have reached the point where repaying it out of federal revenues would require impossibly large tax increases. The more likely solution is to make the dollar worth less and repay the debt with cheaper dollars.

The purchasing power of the dollar would be reduced. Prices would increase. Though people might be paid more dollars, their higher incomes would produce higher taxes, used to pay down the debt. Its amount would not have changed, but each dollar used to repay it would be worth less, making it cheaper.

One word explains this process – inflation. Everything would cost more except the debt. Even with more dollars, people would face higher living costs. They would lose purchasing power.

Add to all this the Federal Reserve. Having seen the slowness of action by Congress and unsure about its response, the central bank has moved on Covid-19 with greater force than ever in its history.

Congress spends; the Fed lends. It has created money and loaned trillions, much more than Congress has spent. It buys federal government debt and bank loans to businesses. To pay back those loans, businesses will have to raise prices, fueling inflation.

The Fed supposed will be paid back, but in those future, cheaper dollars. Any defaults by borrowers will be covered by the federal budget.

Then, there are the states. The federal government can deficit finance, but states cannot. In effect, states want to shift their deficits to the federal government.

Eventually, there will have to be tax increases. Add to that inflation and reduced purchasing power. Deficits and debt cannot continue at current levels indefinitely. The combined cost of the existing deficit budget and Covid-19 outlays must be paid and tax increases cannot cover it.

The price of today's massive debt will most a major tax increase, but most if it will take the form of a reduced standard of living.

People, not Trump or Mills, will decide on opening as Covid-19 lessens

Maine faces major challenge in restarting business

Gordon L. Weil

Who will decide when to begin to open the economy as Covid-19 fades?

President Trump? After a false start, that's clearly out. State governors? Legally, but not likely.

Government has mandated limits on individuals and businesses. People are often told to stay at home except for venturing out for essential purposes. All but essential businesses, often broadly defined, must be closed to the public.

From the outset of the arrival of the virus, the country reacted as if the crisis would be brief. Aid to businesses and workers would tide them over while the coronavirus was brought under control. Almost unprecedented protective measures were imposed, but in the belief they could soon be lifted.

In effect, government action was grounded in remarkable faith in science to come up with an effective treatment in a matter of months or rapidly to develop a vaccine.

Until science triumphs, government patches and protects. The patch is the massive action by the Federal Reserve and Congress, pouring funds into the economy to maintain some personal and business income. The protection is “stay-at-home” and lock-downs.

Discovery of cures is usually slow and uncertain, not a recipe for quick recovery. But the economy cannot be put on hold for an endless period. Governors must come up with policies for “opening” their states. That is proving to be difficult.

Gov. Janet Mills faces an almost impossible challenge. Oxford Economics, a research firm, finds that Maine will be the hardest hit state by the Covid crisis. Its older population and dependence on tourism

plus a retail economy with many small business and self-employed people combine to make recovery unusually difficult.

Seniors must continue to be protected, but Maine needs an influx of people to its lodgings and restaurants and to occupy their second homes. The obvious problem is that they may bring the virus with them, even if they are unaware of it.

Federal guidelines focus on the stabilization and decline of virus cases. Much depends on testing, but, right now, it is overrated. There are insufficient testing supplies, and their effectiveness is questionable. So the date remains elusive when all are tested and those cleared can go to work.

Maine's progress has been good, though it is not yet evident that the state has reached its peak in new cases. It may benefit from its relative isolation with the Canadian border effectively closed and self-quarantine regulations and shuttered accommodations discouraging the flow from elsewhere.

While there is general recognition that science, not government, calls the shots, the economy cannot wait for months or even a year with current cutbacks. Many people will resist being kept at home. Governors will have to allow for gradual opening.

In Georgia, the governor began opening his state last week. But many people and businesses did not change their protective stance. One mayor there received requests for guidance. She said she responded: “Don’t look to government to tell you what to do. If you want to go and get your hair done, that’s on you.”

That's the kind of advice Mills and other governors may have to give as the economy reopens. Not the president, not the governor, but the individual will decide.

It's possible that a vaccine will become available this year, which could reduce the risks of reopening. But behavior may have been changed by the initial Covid-19 experience, especially for the most vulnerable. Even with a vaccine, reopening would be cautious and and decided by each individual.

The state role may be to allow people to take whatever risks they want, provided they don't increase the risk for others. And it can issue mandates that would enhance the freedom of the most threatened.

Stay-at-home and business closings will eventually be relaxed, but wearing masks, which prevent taking in the virus, or face coverings, which prevent spreading it to others, may be mandatory for the long-term. Similarly, social distancing could be maintained, though it would undercut dining out or attending large events.

The result of a policy combining state safeguards and individual decisions could be a self-segregated society. Many people, either because of scientific gains or indifference to risk, may decide to live as freely as possible. Others, including the most vulnerable – seniors and those with illnesses, might stay home.

Whether this course of action would work is unclear. If Covid-19 brings even more serious health problems like blood clots or opening society without an effective vaccine causes the resurgence of the virus, even greater changes in our lives and the economy may be inevitable. Right now, uncertainty reigns.

The most obvious challenge for federal and state governments and individuals struggling with Covid-19 is its menacing mystery.

'Opening' protesters gamble with virus, putting their rights above others' lives

Gordon L. Weil

Let's abolish the police.

That's just a modest proposal made possible by the low crime rate. The police are a drain on taxpayers when there's little for them to do.

Similarly, we should end social distancing, masks and stay-at-home orders, because the number of Covid-19 cases has peaked. It's time to get on with our normal lives. It's possible that a few extra people would die, but not many. Besides, they are mostly old people.

Not good ideas? The presence of the police is the main reason crime is under control. Covid-19 cases have slowed thanks to government-mandated protective measures that are reducing its spread.

The real and growing problem is that some people do not understand how this works.

The best case for opening would be that people need to work and collect their pay to cover the basic cost of living, and some people are simply bothered by prolonged stays within the four walls of home.

But many protesting state government requirements to reduce the spread of the virus say their reasons are not mainly about personal economics or peace of mind. They resist government action that they claim limits their freedom. They want to self-liberate, not self-isolate.

Angry people in the streets protesting actions to reduce the lasting effect of the virus are being organized by a right-wing coalition, including the Trump presidential campaign.

Interestingly, among the demonstrations against action by governors to limit the spread, a crowd gathered to oppose the Republican governor of Ohio, the conservative leader of a state essential to Trump's election effort.

The Ohio demonstration illustrates a split persists between Trump Republicans and traditional Republicans who support their governor. In some southern states that have been Trump strongholds, governors are already easing anti-spread measures.

In understanding the drive to “open” the country, there are economic and health realities. Even if government anti-virus action came to a halt, opening the country would not bring a quick return to the levels of health and the economy that existed before the coronavirus arrived.

Any reopening will be gradual. Change will come to places with less chance of people having undetected Covid-19. That may be less densely populated areas, though that's not yet a certainty. It will also come to those activities in which people are not in close contact with one another. Playing golf may come ahead of dining out.

The economy will not boom to serve unmet demand. The aftermath of World War II is cited, but the national economy then had been subject to wartime rationing. When the lid came off, people bought cars and millions of veterans wanted new homes.

Now, the economy is coming off a sustained boom. There is little unmet demand, so there is not likely to be an explosion of purchasing. It's possible that people will have picked up some new habits during the crisis, leading to more saving and less consuming.

Government, the frequent target of Trump and the GOP, may take a bigger piece of economic activity. It's possible more funding will go to health protection. Greater attention may be paid to older Americans and others who are vulnerable.

As a result of these possible changes from the country as it was before the crisis, the economy may not return to the way things were as recently as January.

Even worse, if protective measures are lifted too quickly, especially without adequate testing to determine the true scope of Covid-19's spread, it is highly likely there will be a new surge of cases and deaths. Re-opening then could take years.

Trump and his supporters appear to believe that reopening the economy will restore strongly positive economic results quickly. If good times were restored and the virus seen only as blip on the boom, that should improve Trump's re-election chances.

If there were a new surge of Covid-19, the economy would have no chance of a rapid recovery and it might slow again. There might be a political price to pay for acting too soon. Governors do not want to take those risks.

For Trump, the calculation is different. The strong economy was his best argument for re-election. He chose not to cast himself as the unifying national leader in time of crisis, preferring to stick with his original plan of relying on the economy. Politically, he has gambled and needs re-opening, even with its risks.

Beyond the 2020 elections, opponents of anti-spread measures insist that personal freedom should be set above the common interest. Perhaps their demonstrations will focus popular attention on deciding the right balance.

Covid-19 crisis shows endangered seniors need greater attention

Gordon L. Weil

When gentleman bank robber Willie Sutton was asked why he robbed banks, it was claimed, though falsely, that he answered, “Because that's where the money is.”

If you could ask Covid-19 why it goes after so many people in senior residential centers, it would have to answer, “Because that's where the old people are.”

For whatever reason, Sutton liked robbing banks. If Covid-19 could set its own priorities, it would admit that it attacks seniors because they are the most vulnerable, making it easier to do its deadly job.

As people age, their immune systems, the body's mechanisms for fighting off invading illnesses, grow weaker. https://www.livescience.com/35908-aging-lowers-your-immunity.html It's natural. As they age, it is also likely that people have suffered from illnesses that have weakened their defenses, even if they seem to have survived in good health.

That's why the dosage of the annual flu vaccine is stronger for older people. It helps them fight off the virus despite the loss of some of their own immunity.

Many seniors live in retirement communities. Some cannot live on their own, because their health requires them to have access to care, sometimes from qualified professionals.

At one end of the spectrum of care are skilled nursing facilities and hospices. Because government health insurance may pay most of their cost, federal and state agencies impose standards of staffing and conditions on them.

But other communities may involve only the shared use of facilities, ranging from dining, to amusements, to exercise. These senior residence arrangements are lightly regulated, but are left to the market to determine costs and conditions.

Senior communities are growing as the number of seniors grows. In 2000, people over 65 were 12.4 percent of the American population. By 2030, they are expected to be 20.6 percent. https://www.statista.com/statistics/457822/share-of-old-age-population-in-the-total-us-population/ In other words, one person out of every five in this country will be a senior.

It is also possible that more seniors will be retired. While the recent trend has been for people to work until an older age, they may find it increasingly difficult to find jobs as the economy slowly recovers.

Seniors have been advised, where possible, to delay the start of receiving Social Security to maximize income. But, in the past few weeks, advice has begun to appear suggesting taking the federal payments earlier to be assured of some income when jobs are slow to come back. https://www.washingtonpost.com/business/personal-finance/should-you-take-social-security-early-for-some-coronavirus-changes-the-math-on-waiting-until-youre-70/2020/04/10/e85486a8-7a6e-11ea-b6ff-597f170df8f8_story.html

Similarly, more seniors may turn to residential housing facilities because they are less costly than maintaining a home of one's own.

While it is known that seniors are far more likely to die from Covid-19 than the general population, insufficient data is available on the effect of the virus. Maine reveals only that more than half the cases are over the age of 50. https://bangordailynews.com/2020/04/20/news/state/another-mainer-dies-as-coronavirus-cases-hit-875-statewide/ That both confirms what we already know about reduced immunity and hides much relevant information about how serious the problem may be.

Across the country state agencies are reporting that, at some congregate care locations, Covid-19 has spread rapidly and, in some places, has caused a spike in deaths. Evidence mounts that regulation has been inadequate either in toughness, inspections or both. https://www.nytimes.com/2020/04/19/nyregion/coronavirus-nj-andover-nursing-home-deaths.html?campaign_id=2&emc=edit_th_200420&instance_id=17772&nl=todaysheadlines&regi_id=267859&segment_id=25542&user_id=dad4e9655de8f76c4cb3f9003974adeb

Some advocates of ending protective action appear to believe seniors are expendable. They accept the possibility of increased deaths as the price of opening the economy.

Short of such indifference to seniors, the solution might turn out to be a segregated society. Young people will go back to work, confident that, even if they contract Covid-19, they will survive. If older people need protection, they might find themselves unable to return to a normal life style.

For seniors, opening the country may mean closing it for them. Unless medical science produces a vaccine or medication that protects them, they may shelter in place for the long haul.

Unless government shares this kind of indifference to the problems facing seniors, it needs to take action.

Protecting public health will have to mean standards about conditions, staffing and emergency equipment that are applied not only to care facilities now subject to regulation, but to any congregate facilities for seniors.

Seniors should have a reasonable expectation that residential communities are taking steps to protect them from threats to which their immune systems can no longer respond.

While they do not all serve as health care facilities, they all offer special living arrangements for seniors. Just as they must meet higher fire protection standards, they should be required to meet certain health protection standards.

That also means more and better inspection both of facilities now subject to regulation and others to be added. Stronger sanctions are needed. If a senior residence falls below standards, government should have the tools to force it into compliance.

For Maine, this is both a special responsibility and an opportunity. With the oldest average population, the state needs to sharpen its focus on the well-being of the elderly. The first step would be greater transparency about the Covid-19 impact on seniors. Hiding behind patient confidentiality is unconvincing.

Beyond doing a better job of focusing on seniors, Maine could build its special role as a welcoming home for retirees. Even now, it is an obvious magnet for seniors. By strengthening its policies, it could boost its retirement role as an element of its economic growth.

Trump ignores Constitution, federalism; fails tests of leadership

Gordon L. Weil

On December 8, 1941, President Franklin D. Roosevelt asked Congress for a declaration of war against Japan, which had carried out a surprise attack on Hawaii a day earlier.

He sought to inspire Americans to fight in the new world war. “The American people in their righteous might will win through to absolute victory,” he said.

He said nothing about America First, the national organization determined to keep the country out of the war. Instead of gloating about his wisdom in starting war preparations or sneering at his critics, he focused on national unity at a time of crisis.

On March 4, 1865, at the end of the Civil War, President Abraham Lincoln did not glory in victory, but called upon the country to show “malice toward none, charity for all.” He did not even mention the defeated Confederacy.

Both Lincoln and Roosevelt are considered to be among the greatest American leaders. They earned their greatness not because they claimed it for themselves, but because their actions led others to honor them for their courage and leadership.

When the entire country is under attack, presidential leadership comes sharply into focus. Pearl Harbor in 1941, 9/11 in 2001 and Covid-19 in 2020 have all been national threats, whose outcome has been uncertain. All have caused harm and fear.

Whatever Americans thought of their leaders' policies, in these crises each found words to reassure and encourage the entire country.

While Americans cannot expect that the president will always have the right answer to a crisis, the people benefit from a president who exhibits qualities of leadership that ignore partisan battles and stresses common values and hopes.

What are characteristics of leadership that are needed?

Above all, the people seek a call to unity. Lincoln understood that Americans were linked by common ideals and a shared history, which he believed should be stronger than any dividing force. It explains why African-Americans, Indians, and people of Japanese descent fought in World War II in the armed forces of a country that severely discriminated against them.

Leadership also requires presidents who tell the truth. Americans expect to rely on what they are told. Then, they will act as the situation requires, whether that means enlisting in the armed forces or wearing a face mask.

People also look for consistency in messages from the White House and government. If they are to commit to a course of personal and community action, they want to know that their leaders are also committed. An unsteady signal undermines a willing response.

In a crisis, people will work together. Cooperation and shared sacrifice may come naturally, but they respond to leaders who set the example by setting aside past grievances and partisanship.

Leadership requires courage. Leaders, like all people, make mistakes, and we expect them to acknowledge their errors. Even more important, leaders need to have the courage to do what the situation requires, no matter the cost to themselves or their political futures. This is the basis of greatness.

President Donald Trump fails these tests of leadership.

The main point of his presidency is a focus on himself and his hope that winning in 2020 will remove any doubt about the legitimacy of his 2016 election. Everything about government is subject to that interest, not about leadership.

He awards himself greatness, an attribute that can only come from others. He uses self-congratulation mainly to promote what he thinks is his standing with voters, always with an eye on his re-election. He glories in his title and his false sense of success.

Not all presidents are great leaders, even when the times call for leadership, but few are destructive. Unfortunately, Trump is among that few.

“When somebody is president of the United States, his authority is total,” he said. That view would destroy the legacy of the American Revolution, which toppled the total authority of Britain's king.

The essence of the American system of government is that no person or group of people in it has total authority. It may not be efficient, but it's what we want.

“The federal government has absolute power,” he proclaims. If so, how can shared sovereignty, the keystone of federalism itself, survive?

The states created the federal government and kept for themselves all the powers not given to that government. The federal government's power has increased, but it has no power to abolish federalism.

In the face of criticism from across the political spectrum, Trump acknowledged that governors would decide on when and how recovery would occur. But he did not withdraw his assertion of power, saying, “If they need to remain closed, we will allow them to do that.” He has no power to “allow” states to exercise their powers.

Only the people have total authority and absolute power in America.

Voters will soon decide either to legitimize Trump's theory, changing the Constitution, or to protect the Constitution by changing the president.

States fight coronavirus on their own, revealing partisan split

Gordon L. Weil

On April 2, Gov. Janet Mills put a Maine stay-at-home order into effect, joining in the third wave of states issuing such orders to limit the spread of Covid-19.

States had begun acting when New Jersey made such an order on March 21. The states sought to keep ahead of the spread, after trying to avoid limiting the freedom of movement valued by most people as their right.

Mills' order recognized the right of each state to protect public health and safety within its borders, especially needed in the absence of a coordinated national response to what was obviously a world-wide crisis.

Covid-19, the illness caused by a new coronavirus, had begun in Wuhan, a city in China unknown to most Americans. Yet, in less than three months, it had spread from Wuhan to Maine.

Despite this fact, American policy treated the virus as if it recognized borders. By the time President Trump declared a national emergency a few days ago, five states had still not yet ordered people to stay home and three more had only limited restrictions.

Much attention has been focused on determining when the U.S. knew that action was needed and began preparing for the invasion of the virus. Whatever the answer to those issues, it is evident that much of the initiative in handling it was left to the states.

There is no medication known to reverse Covid-19 and no vaccine. On the front lines, states needed to acquire the equipment to deal with caring for those who took ill and order changes in human activity that would limit the spread of the virus.

Some did better than others. The first state to be hit hard was Washington, and it was in the first wave of states to issue stay-at-home orders. It was joined by Oregon and California, covering the entire West Coast. It may have paid off. Los Angeles has experienced a lower per capita impact than Boston.

The problem in leaving the fight against the worldwide spread of a virus to the states was the shortage of the equipment needed to fight the spread : masks, personal protective gear, tests and ventilators. Inevitably that meant the states would compete to obtain the supplies they needed. Competition was not the best way to allocate scarce resources nationally.

Also, if governors had spare equipment, how likely would they be to send it out of state when they might need it later? Some sharing took place, but it was politically risky.

The states had expected a federal back-up existed and could be deployed as needed across the country. Instead the federal stockpile was both inadequate and kept in federal hands. The federal government competed with the states in seeking supplies from private manufacturers.

The response in states was uneven, despite the threat being national. Mills has issued clear directives. Maine data has been provided daily, though it has fallen short in some details that other states publish. Maine CDC is the source, and it appears not to be politically influenced. It is probably not possible to collect hard data on compliance.

One characteristic of state responses stands out. States with Democratic governors were the most active in responding early, while most GOP governors hung back.

In the first wave of nine state stay-at-home orders, only one governor was a Republican. Ohio Gov. Mike DeWine took the threat seriously, listened to his science advisors and has been criticized by fellow Republicans. One leader reported that his “friends” find that DeWine is “overreaching and ruining the economy.”

Like Mills, the states that have taken the most organized action against the virus are relying on the advice of scientists who serve no matter what party is in power. All of the lagging states have Republican governors seeking to support Trump's attempts to minimize the threat and “reopen” the economy by accepting some casualties.

The split among states is clear evidence of how the response to Covid-19 has been politically partisan. Trump supporters claim that shutting down parts of the economy is more harmful than Covid-19 itself. Opponents, including all Democratic leaders, focus more on health than economic activity.

Now, three states on the West Coast, called the Western States Pact, and seven states in the East, including New York, are working on joint plans for recovery. All are headed by governors who reject Trump's claim to call all the shots. Some states, going it alone, try to track Trump's policies.

Trump attacks states and governors. He assigns much of the blame for an insufficient response to them. If the economy only can open slowly, governors face charges of foot-dragging and inadequate loyalty to the president.

States may not forget their experience in this crisis. When it has passed, the federal-state relationship could be changed for good.