The American Mind

Pray March goes out like a lamb

William Hillman

(4/2020) March has come in like a roaring lion, lets pray it goes out like a lamb.

I had planned to write about education this month. It seems every time my fingers touch the keyboard, I end up typing something about the corona virus. It’s a topic that, as a friend said, "sucks the air out of the room."

I first recall hearing news reports about the COVID-19 in January of this year. In early February, I found myself in the company of my friend, Dan David, who described what was really going on. What he said made my heart sink. Dan is the "China guy", founder of the largest Chinese investment research firm, and subject of the movie, "The China Hustle". He explained that the spread of the virus was vast and 10 to 100 times larger than what was being reported by the Chinese government. They were seeing industrial wide shut downs in China. The virus would go global and it may take more than a year to find a vaccine and get it under control. Global supply chains would be disrupted, and the financial markets will tank. He described a doom and gloom scenario.

As in the past, Dan has been on target with everything he predicted to date. The latest official reports from the Chinese government is 3,287 deaths. From people in the know and as reported in several news outlets, 15 – 20 million Chinese cell phones have gone quiet. This suggests that Dan David is correct and the epidemic in China is much worse than what is being reported.

Now the epidemic is spreading across this great nation at an exponential rate and our leaders have very tough choices to make. At this point, there are two paths of response, shut everything down and ignore the economic impact, or attempt to find some balance between personal safety and impact on small business. President Trump is correct that a one-size-fits-all approach is not the answer.

Victor Davis Hanson of National Review, made a statement that doesn't get nearly enough attention: "The psychology of erring on either side is important to note: Those calling for more severe precautions that will further harm the economy do so in the admirable agenda to lower the deaths (in the sense that one dead American is a tragedy), and they can quantify their efforts in the known number of dead. In contrast, those who advise caution out of fears of an economic meltdown will never be able to quantify the greater number of fatalities from a depression than from an infection. It is more difficult to tie likely spikes in suicides, postponed or canceled medical procedures, increased substance abuse, crime, ruined lives, etc. directly to the virus, even though the link is highly likely."

Flatting the curve.

The logic behind shutting down business and limiting contact is to stop the exponential spread of the virus and turn it into a lineal spread. Without a change in the rate, hospitals will be overwhelmed, and the death rate will be high. Understand, eventually most of us will get the virus, but the longer the timeframe of infection spread is stretched, the more time the medical community will have to develop treatment procedures and the lower the death rate.

I'm a numbers guy so I've been playing with some numbers. There are 60,000 people in the township where I live. I've seen a lot of numbers on the internet for predicted infection rate of COVID-19, 50% seems the average. So my area could expect 30,000 people infected. Hospitalization rate predictions range from 5% - 10%. 1,350 - 3,000 people will need to be hospitalized. The hospitals that service our area have 600 beds between them. At any given time, most hospitals are 75% filled. This leaves 150 beds for 1,350 - 3,000 possible patients. These numbers are optimistic since the two hospitals serve an area larger than my township.

Nationwide, the US has 2.77 hospital beds per 1,000 citizens. Assume a higher vacancy rate of 60%, or rounded to 1 available bed per 1000. Assume a higher vacancy rate, and round to 1 available bed per 1000. The nation has 331,003 beds available. Using the above infection numbers and a population of 331 million, we end up with 50 possible patients for every bed. The infection spreads in clusters so areas of high infection could see bed to patient ratios in the 100s.

Beds are not the problem; ventilators are the critical item. I could not find any information on the number of ventilators, but my guess is there are far fewer ventilators then beds.

The other important issue is the long-term economic effect.

The economic impact from the forced closures of business will also lead to thousands of deaths.

The shutdowns and forced business closures will decimate small businesses. Large businesses who can afford legal fees, and maybe more important, can afford lobbyists, will be taken care by the government. For example, independent lumber yards are listed as non-essential in Pennsylvania and are required to close. Home Depots and Lowes are permitted to stay open.

Twenty five percent of small businesses have less than two weeks cash reserve. Most small businesses have 27 days or less of cash reserve. That’s according to data gathered by JP Morgan Chase as part of its "Cash is King: Flows, Balances, and Buffer Days" study. Sixty million people, or almost half of all workers, are employed by those small businesses.

At this point I should talk about the numbers of businesses expected to fail and the skyrocketing unemployment numbers. But those numbers or just way too depressing. Let’s just keep it to 30% unemployment for areas with mandatory closures. When all is safe, how many of those jobs will come back? Half, or if we are lucking, 60% - 75%. A 1% increase in unemployment results in about 1,500 excess deaths per year in America. That’s a lot of deaths due to just the business closures. It will take years to recover from this crisis.

Give credit where credit is due. President Trump campaigned on bringing manufacturing and production back to the States. He wanted the jobs to return, and more importantly now, he did not want the U.S. to be beholden to other countries, specifically China, for critical products. President Trump said over and over again that the U.S. needs to be economically independent.

President Trump also rightfully criticized the Federal Reserve for keeping rates low. This puts our Nation at real risk if the economy should stumble. Clearly, he was correct, and I wish he had acted earlier. Last week, the Fed dropped the interest rate to zero. That is all the Federal Reserve can do. To quote Dan David, "That was the Fed’s bazooka. We are not even sure it made a sound." The government is considering a massive stimulus package. It will pump trillions of dollars into the economy. I ask you, name me a time when putting a nation’s printing presses into hyperdrive has ended well?

Think of how much more prepared we could be if not for congress bringing the government to a standstill with its impeachment show for the last year.

Read past edition of the American Mind