I thought I should bring this snippet of information, hidden in a Wall Street Journal editorial, to your attention:

A McKinsey analysis last week estimated that 40% of workers in Los Angeles and 36% in San Francisco will lose jobs or income during the pandemic. The Southern California Association of Governments predicted the “pandemic’s economic impacts [on the region] will be severe and long lasting.” Unemployment in Southern California will average 12.2% in 2021, the outfit forecast, and sales will decline between 53% and 65% at restaurants over the next two years.

It could be worse in New York City since 15% of Manhattan residents have left, according to cell-phone data analyses. Not all will return once businesses are allowed to reopen, and some finance and tech companies say they will let more employees work remotely. New York landlords say many tenants aren’t paying rent, and they have to make mortgage and tax payments. New York City (3.9%) and Chicago (3.8%) have the nation’s highest effective commercial property tax rates after Detroit (4.2%).

Eventually there will likely be business foreclosures, evictions and bankruptcies, which will reduce property values and in turn government tax revenue. California, New York, Illinois and New Jersey make up 30% of the national economy, so their business carnage will affect farmers, meat processors, truckers, manufacturers and suppliers nationwide.

Maybe not anymore. The emphasis above is mine. 15% of the population is a quarter million people. I wonder how much total income those people represent?

I don’t know what the situation in Los Angeles is but hereabouts I have seen quite a few “For Sale” signs going up, moving vans moving households out, but no moving vans moving households in.

When the big cities raise their heads in a week, a month, or three months, what will they see? Let me remind you that this there’s a decennial census being conducted, too.

Economist Kevin Warsh takes to the pages of the Wall Street Journal with an op-ed that underscores points I have been emphasizing for months now:

The current economic crisis is principally a supply-side shock to businesses on Main Street. Because of the pandemic and lockdown, workers have been forcibly distanced from their jobs, and new capital has been scared to the sidelines. Service businesses—representing the bulk of the U.S. economy—are at risk of becoming the greatest casualties.

There are downstream effects from the supply shock on aggregate demand, including weak consumer spending, and from the Main Street carnage on listed securities on Wall Street. The bulk of the government’s largesse to date has been devoted downstream. To right the balance—and avoid a slower, weaker recovery—policy makers should direct their attention upstream, to the supply side of the economy and Main Street.

He has three warnings. First, when you’re in a hole stop digging:

First, Congress is understandably tempted to try to re-create the status quo ante. The pandemic wasn’t the fault of our citizens, so shouldn’t government simply and fully replenish the coffers of those harmed, as if the crisis never happened?

That isn’t feasible. The depth and duration of the recession are unknown. Businesses and households can’t be made whole when the economic hole is still deepening. And it is impossible to know what would have happened absent the pandemic. A prosperous future is possible only if capital and labor move with due speed to the business models and jobs of the postpandemic era. American-style dynamism isn’t an obstacle to recovery; it’s the essential element.

The U.S. economy isn’t a pop-up store. It’s a complex organism built on relationships—between supplier and business, employee and employer, customer and company. Relationship capital is the most precious and, at present, the most precarious. As the economy reopens, the after-tax rewards for work and new capital investment should increase. Otherwise, relationships will atrophy and the economy will suffer.

And in this war there have been war profiteers—retailers and 3PLs that have continued operations through the lockdowns unencumbered. They should not remain ignored. Second, vultures always gather around carcasses:

Second, when the government puts out a shingle offering money, the line tends to get long and the opportunity for mischief multiplies. The Treasury and Fed are working in a difficult environment to support businesses affected by the pandemic. They should resist the temptation to play favorites. Bailouts don’t age well, especially when they are bespoke.

The ink of the Cares Act was barely dry before the recriminations against disfavored beneficiaries began. Liquidity for all solvent comers—without fear or favor, without strings or restrictions—should be the guiding ethos. We should trust the good sense of businesses and households to know what to do with the money.

We should not be surprised that when money is thrown from a helicopter that there are those with gathering nets waiting below and, by and large, they aren’t the most needy or deserving of help. And third, there ain’t no such thing as a free lunch:

Third, there are limits to government spending. (Humor me.) The debt markets may seem to have infinite capacity to fund Washington’s fiscal profligacy. But it’s an inopportune time to bet on the perpetual kindness of strangers. Economists didn’t forecast the striking fall in real and nominal interest rates over the past 30 years. Nor is there accord on what would change the direction. The pandemic should remind us of tail risks, including sovereign risk.

The design of Washington’s pandemic response is far more important than its size. The strength of the postpandemic recovery is not chiefly about the magnitude of new government spending. The preoccupation with managing aggregate demand is misplaced, especially in this crisis.

That last is a shot across the bow of the Modern Monetary Theorists who no doubt believe that this is their moment. Sadly, I’m confident that Congress is eager to apply their demand side playbook to the present downturn which is quite different from the sort about which John Maynard Keynes wrote.

There is nothing that I could say about Memorial Day that wasn’t said 1,000 times better by the movie I’m watching right now, The Best Years of Our Lives. If you’ve never seen it, set aside a day and make a point of seeing it. You’ll need the rest of the day.

I’ve made one prediction and it is rather clearly being fulfilled already. Here’s another one.

However bitter the complaints about previous census results they will pale in comparison to the anger and outrage over the results of this decennial census. Lots of people will be horrified at the results, particularly in New York and Chicago. I will not be a bit surprised if Chicago is no longer the third largest city in the U. S. but fallen to fourth or even fifth.

New York, Illinois, and California will all lose seats in Congress; Texas and Florida will gain them. The big questions will be whether New York and California lose one seat each or two.

At Bloomberg economics columnist Ferdinando Giugliano pens a rather lugubrious column, the thesis of which is stated in its opening paragraph:

The 2008 financial crisis led the public to discover the limits of economics. The Covid-19 pandemic risks having the same effect on scientists and medical doctors.

While I think that the crisis should have that effect I doubt it will, at least not in the near term. You need only look at the TV spots lauding the heroism of medical professionals to recognize that.

Perhaps at some future date a dispassionate inquiry will note that this crisis has revealed just how tenuous a grasp on life medical care has granted so many. Supportive care while the patient heals him- or herself is less a mark of victory than an acknowledgement of inevitable defeat, particularly in the elderly. Quite to the contrary I expect that health care will retain most or all of its patina.

Are we not spending enough on health care or far too much? I suspect that will continue to be debated for the foreseeable future.

Hope springs eternal in the human breast;
Man never Is, but always To be blest.
The soul, uneasy, and confin’d from home,
Rests and expatiates in a life to come.

The editors of the Washington Post tell us that unlocking the economy can’t take place until there’s a national diagnostic testing plan:

THE CURRENT approach to the coronavirus pandemic in the United States is based on wishful thinking — that a vaccine or drug therapy will be available by the end of the year, or sooner; that death and illness will taper off with the summer heat, and not come back next fall. But what if none of this happens? What if the novel coronavirus sticks around for a year or two or longer? In that case, diagnostic testing will be critical to our ability to manage lives, jobs, schools and health. Yet we still lack a federal strategy to get there.

Diagnostic testing is important, absent a vaccine or therapy, as part of a concerted effort to identify the sick, isolate and treat them, and allow everyone else to get back to business. Right now, testing is the foundation of state decisions about reopening, yet the testing landscape is disorderly and inadequate. After a miserable start, the pace of testing is slowly ramping up, now exceeding 400,000 daily. But that is still far, far below what experts say would be required to sustain a new normal. The effort has been left to 50 states and a hodgepodge of academic laboratories, hospitals and private companies. Some laboratories are overwhelmed, and others underutilized.

I found their characterization of a vaccine, drug therapy, or spontaneous decline in cases of COVID-19 as wishful thinking while pointing to diagnostic testing as a practical solution grimly amusing. Rather than talking tactics they should start thinking about logistics.

Were they to do so they would realize that the resources for diagnostic testing at the scale that would be necessary to do what they’re talking about are beyond our grasp and will remain so. Just to give them a head start, there are 330 million people in the U. S. Enough diagnostic testing to convey the necessary level of security would not be instantaneous and it would not be a one-time matter. It would be like painting a wall by casting drops against it from a brush. Worse.

I agree that testing could allow us to focus resources where they’re needed just not diagnostic testing.

I also agree with the editors that there’s one ingredient necessary to unlocking which is missing. Pragmatism. As long as the “no sparrow falls” standard is being held up as the objective, we’ll never reopen.

At The American Interest Francis Fukuyama asks three questions about today’s China. The first question is what kind of a regime does China have? For most of the piece he struggles to place that question in the context of the whole sweep of China’s history finally deciding that President Xi’s objective is a revival of Mao’s totalitarianism with Chinese characteristics, a simultaneously excessive and inadequate answer. I would answer the question more simply. It’s nearly a textbook example of a fascist regime complete with irredentism and extreme nationalism, coupled with racism.

His second question is how should the United States and other Western democracies deal with Xi’s China? My answer there is simple, too. We shouldn’t deal with it at all. We should leave it completely alone, eliminate trade with it with all due haste, and take steps to encourage others to do the same.

His final question is if China were to change, what should the Chinese people hope for? IMO they should hope for a China that the rest of the world is content to leave alone rather than feeling threatened enough that eradication is the only alternative. That’s a pretty limited hope but as things look now it may be as good as it gets.

This is still anecdotal but sadly suggestive of worse news to come. The Associated Press reports that Mexican cities adjoining Southern California are where most of the new cases of COVID-19 are appearing other than in Mexico City itself:

At least one American border region is experiencing a spike in hospitalizations that some believe is driven by American citizens who live in Mexico coming to the U.S. for care.

But in Tijuana and other Mexican border cities, many doctors, health officials and ordinary citizens worry about the disease coming in the other direction.

San Diego — with roughly the same population as Tijuana — has triple the number of confirmed cases of COVID-19, at more than 6,000. The state of California has about 10 times as many people as the Mexican state of Baja California to the south — but reported more than 20 times the number of cases. Mexico has a notoriously low testing rate, but that alone seems an insufficient explanation.

Tijuana saw its cases begin to rise significantly in late March soon after California shuttered many businesses and ordered people to stay home, said Dr. Remedios Lozada, who is in charge of the Tijuana health district. It appears that much of the surge came from dual nationals and legal residents like Gama, who wanted to be closer to family or live more cheaply in Tijuana during the shutdown.

“There were a lot of people who emigrated here to Mexico,” Lozada said. “That was when we began facing the higher number of cases.”

Tijuana’s hospitals became swamped with suspected COVID-19 patients. Desperate relatives demanded information about their loved ones outside medical facilities. Nurses and doctors protested that they didn’t have the necessary protective equipment as the virus swept through their ranks.

Baja California Gov. Jaime Bonilla said in mid-April that the public health system’s doctors in the state were “dropping like flies” because they lacked protective gear.

I’ve been warning of this for months. We might be able to prevent our own outbreak of COVID-19 from overwhelming our health care system. How we will prevent our outbreak from overwhelming Mexico’s health care system eludes me.

California’s attitude towards its border with Mexico has always been risky but as long as most of the risks were being borne by the U. S. Mexico had few incentives to control the situation.

Either both countries need to get control of their borders or the U. S. will need to control the flow of people between California and surrounding states, neither alternative being particularly likely or attractive. What’s more likely is that as long as there’s an outbreak in Baja there will be one in Southern California and vice versa.

To keep matters in perspective the outbreak in Mexico remains minor compared to that in the U. S. just as that in California is minor relative to that in the New York City metropolitan area. We had best hope that the virus does, indeed, tend to wane in the summer heat. Or the challenge will be keeping it that way.

This article at E21 throws cold water on the notion of a quick recovery from the lockdowns:

At this point, a V-shaped recovery is basically a pipe dream. Individuals and businesses will undoubtedly be scarred by this unprecedented and catastrophic event. The best we can hope for now is the “swoosh” that’ll put us on a path to a steady, but slower, recovery. Just how fast we return to pre-crisis levels of employment and productivity will depend on the natural path of the pandemic, the timing of medical innovations like antivirals and vaccines, and the willingness of policymakers to continue to strategically deploy cash to bolster a flailing economy.

making the crucial points

To achieve a V-shaped recovery, we’d need to able to reopen the economy with similar haste.

and

Recent polling indicates that more than two-thirds of Americans are “somewhat” or “very” worried about becoming infected by the virus or having someone they know becoming infected.

Presently, from a statistical standpoint there are 5 chances in a 1,000 you’ll contract the disease and 3 chances in 10,000 that you’ll die from it. However, when you discount the New York City metro area, those odds decrease to 2 chances in a 1,000 and 1 chance in 10,000 and when you further discount the Boston and Washington, DC areas, it decreases even farther. How do you account for two-thirds of Americans being somewhat or very worried about becoming infected?

I guess that depends on the working definition of “somewhat”. I’m concerned enough that I think that taking measures to avoid contracting the disease like wearing a face mask in the grocery store, maintaining social distancing, washing my hands frequenty, and wearing gloves is prudent, if only to reassure others. I guess I would characterize my views on contracting the disease more as fatalistic than somewhat concerned. If, despite taking basic precautions, I die, I die. Everybody dies of something.

I remain baffled by the large number of people hereabouts, especially public employees, who won’t take basic precautions and yet will undoubtedly support the re-election of the present political leadership. I don’t think you can coherently have it both ways. Do they agree with the political leadership or disagree?

At this point and with the ongoing mixture of panic and denial, unless we’re incredibly lucky and a highly effective vaccine against the virus is produced in miraculously short order, I doubt the U. S. economy will be fully recovered in my lifetime. I think it could be if the form taken by future “stimulus” packages were more prudent and considered and less politically motivated, it would result in a faster recovery. We should also remember that we presently have good reason to believe that the higher the percentage of debt relative to GDP, the slower economic growth will be.