At Bloomberg Karl W. Smith proposes something I think is a pretty darned good idea:

The coronavirus has U.S. businesses grappling with enormous uncertainty, making them cautious about new investment. At the same time, without increases in private investment and capital spending, the overall economy won’t be able to make the structural changes required to prosper in a post-pandemic environment.

What’s needed are policies that both spur investment now and put the economy in a better position for long-term growth. One idea that should be part of the debate is to allow the permanent full expensing of all capital investments.

If you think of this change as a relatively minor detail, consider the big picture: The Federal Reserve currently has limited ability to use interest rates to stimulate investment. In a crisis such as this, typically the Fed would lower short-term interest rates to reduce the cost of borrowing. That would then set off a virtuous cycle: Capital expenditures would increase employment, which would increase spending, allowing more businesses to expand, and so on. That option isn’t available because short-term interest rates are already at zero.

If you’re not willing to abolish the business income tax entirely, current year expensing of capital expenditures is the next best thing. The corporate income tax is an inefficient tax. It actually falls on workers and consumers. Remember that the next time you hear political posturing about corporations “paying their fair share”.

Nearly all major developed countries allow current year expensing. We are absurdly behind the times.

I would like to see something a little more targeted than what Mr. Smith proposes but it’s close enough for government work as the saying goes. I think that we’re likely to see more capital investment within the U. S. to the extent there is capital investment at all.

In their Wall Street Journal op-ed on the risks of over-reliance on international pharmaceutical manufacturers, Scott W. Atlas and H.R. McMaster conclude:

A secure drug supply chain couldn’t have made up for the Chinese Communist Party’s decision to conceal the threat of Covid-19. But it is essential for mobilizing resources to mitigate the crisis. And the stakes are high, even in normal times. More than 15 million American seniors, or 1 in 3, take five or more medications daily. As the U.S. population ages, society will become even more dependent on drugs indispensable to treating the biggest killers—heart disease, cancer and stroke. Preventing an interruption of the supply of vital medications that save lives and treat diseases, whether during pandemics or in routine care, is a matter of national security.

If you’re not aware of the mechanics of 21st century pharmaceutical production, they provide a reasonable primer:

While U.S. pharmaceutical companies may preserve redundancy in their sources for patented drugs, the generic drug business, which accounts for more than 90% of all U.S. prescriptions, prioritizes low cost over supply-chain resiliency. Most generics, including antibiotics, are imported from India—and India imports some 70% of its active ingredients from China. America needs to understand and diversify sources of supply, as well as maintain a strategic reserve of antibiotics and the key drugs for the most prevalent serious diseases.

Beyond scale and complexity, details on drug manufacturing are opaque and complex. The Food and Drug Administration requires country-of-origin markings, but the U.S. Court of Appeals for the Federal Circuit ruled in February that processing ingredients into tablets in the U.S. is enough to constitute “manufacturing.” A drug made into tablets in the U.S. with active ingredients from India may list only the U.S. as “principal place of business” for FDA purposes. Labeling should be straightforward, but not at the sacrifice of security.

There is no robust system of international civil law. If you’re injured by a prescription drug, you can sue the company under whose brand it was made. Or, if you’re killed by an adulterated drug, your heirs can sue. If the drug was manufactured in India using Chinese ingredients, that company has no or next to no legal recourse.

The use of ingredients manufactured overseas isn’t limited to generics, BTW, and is isn’t limited to pharmaceuticals. Just about every food additive to change a food’s color, texture, or nutritional content is made in China. Consider that the next time you eat a Twinkie (or any other processed food).

Illinois Gov. J. B. Pritzker is outraged at the judge’s ruling that found that his emergency powers had lapsed at the beginning of April as noted in this report from WIFR:

CHICAGO, Ill. (WBBM) — Governor J.B. Pritzker has filed an appeal of a downstate judge’s ruling exempting a Republican state lawmaker​ from the governor’s extended stay-at-home order.

State Rep. Darren Bailey (R-Xenia) claimed in a lawsuit filed last week that Pritzker has exceeded his authority and is violating the civil rights of the state’s residents by extending the stay-at-home order for an additional 30 days, through May 30.

Clay County Circuit Court Judge Michael McHaney on Monday granted representative Bailey a temporary restraining order, barring the governor from enforcing the stay-at-home order on the lawmaker, meaning Bailey won’t have to comply with the extension once it begins on Friday.

The judge said the governor’s extension, “shredded the constitution.” Representative Bailey agrees, calling the extension an overreach of Pritzker’s power as governor. While Bailey is the only person exempted from the stay-at-home order, the judge’s ruling opens the door for others in Illinois to join his lawsuit, or file their own.

Pritzker isn’t wasting any time appealing the ruling. Illinois Attorney General Kwame Raoul filed a notice of appeal with the Illinois Appellate Court on Monday night, asking the court to reverse McHaney’s ruling, and dissolve the temporary restraining order.

The governor has said Bailey’s lawsuit puts people in Illinois at risk, and he has vowed to “fight this legal battle to the furthest extent possible.”

and from Crain’s Chicago Business:

A judge from far southern Illinois on Monday threw a legal bombshell into Gov. J.B. Pritzker’s continuing response to the COVID-19 pandemic, ruling the governor exceeded his authority in issuing a statewide stay-at-home order.

Pritzker immediately blasted the judge’s ruling, sought in a case brought by state Rep. Darren Bailey, R-Xenia, saying it violates “decades of precedent” and “puts people in danger.”

IMO Gov. Pritzker is directing his ire in the wrong direction. He should be blaming Illinois do-nothing, corrupt, incompetent legislature. All of us including Gov. Pritzker must adhere to the law, emergency or not. That the legislature has not amended the law to extend the governor’s emergency powers is neither the plaintiff’s nor the judge’s fault.

You may not be aware of it but the Portuguese experience during the COVID-19 epidemic has been somewhat different from its neighbors as the following table shows:

Portugal’s strategy in responding to COVID-19 has differed somewhat from those of its neighbors. In summary it closed off its nursing homes to protect the most vulnerable and initiated additional measures to prevent the staffs of those facilities from transmitting the virus to their residents, it created triage units adjoining hospitals to screen COVID-19 cases, and it granted guest workers and asylum-seekers complete access to all measures used to deal with the disease.

According to this article, the Portuguese attribute their relative success to

• They had an additional week to prepare for the virus relative to Spain
• Strong “civic spirit” bolstered by a sense of national identity, what I would characterize as social cohesion
• Largely voluntary compliance with their “lockdown” directives

I believe that a very simple model with just three parameters (population density in the largest city, number of travelers to/from China in January, latitude) provides a fair first order approximation of the number of COVID-19 cases in any given country or state and that the number of deaths can largely be inferred from the number of cases with variations for demographics and differing national responses. Under the circumstances Portugal has clearly responded pretty successfully.

But has Portugal been prudent or just lucky or both? Portugal’s economy is less interconnected with China’s than its neighbors. Does that play a role in the difference?

The number of diagnosed cases of COVID-19 worldwide has topped 3 million; the number of deaths due to the disease is over 212,000. Here in the U. S. more than 1 million cases have been diagnose and nearly 57,000 deaths are attributed to the disease.

Most of the U. S. remains under “stay at home” directives although they are being lifted or will soon be lifted in some states. Other states are extending those directives.

Although there are some signs in some places (New York) of “bending the curve”, it remains hard to assess the relative importance of varying causes in identifying why that might be. Post hoc propter hoc seems to dominate thinking.

IMO the “Holy Grail” of the struggle against COVID-19, a vaccine, will remain elusive for the foreseeable future. Although lots of things are being tried on an experimental basis, supportive care remains the primary treatment modality. There are some signs that strategies for supportive care are improving, illustrated by a leveling off of the use of ventilators.

The big news here in Chicago is described in this report from WGN TV:

CHICAGO – A video going viral on social media reportedly shows people attending a crowded house party in Chicago early Sunday in violation of the state’s stay-at-home order.

Posted live to Facebook by Tink Purcell, the video appears to show people partying and listening to music while standing shoulder-to-shoulder inside a home in the early hours of Sunday morning.

While some people in the video are wearing masks, most are not, and everyone in it is breaking social distancing recommendations issued by the state to prevent the spread of COVID-19.

The Chicago Police Department could not confirm the exact location of the party, but many residents told WGN it possibly took place on the West Side. On Sunday afternoon, CPD issued the following statement:

We are aware of a video circulating on social media depicting a large house party inside of an alleged Chicago residence. While we cannot authenticate the nature or location of the gathering, we want to remind everyone of the social distancing requirements in place. CPD will disperse crowds in violation of social distancing requirements, and if necessary, issue citations or as a last resort, enforce via arrest.

I don’t think that what’s going to happen if the “stay at home” directives stay in place long enough is that people will become depressed. I think that people will stop complying with the “stay at home” directives. We’ve already been under such a directive for about six weeks. The rules have always been too arbitrary. Lawn services are an “essential business”? Non-emergent city tree-trimming is essential? Non-compliance by city workers is widespread if not universal. Mayor Lightfoot, clean up your own house.

I have reservations about Scott Gottlieb’s WSJ op-ed, urging a massive effort and a massive rollout of a SARS-CoV-2 vaccine in the U. S.:

The first nation to develop a vaccine for Covid-19 could have an economic advantage as well as a tremendous public-health achievement. Doses will be limited initially as suppliers ramp up, and a country will focus on inoculating most of its own population first. Even with extraordinary international collaboration among multiple companies, it could be years before a vaccine is produced at a scale sufficient to help the entire world. The first country to the finish line will be first to restore its economy and global influence. America risks being second.

China is making rapid progress, with three vaccines entering advanced development. Chinese officials say they could have a vaccine available for widespread use next year. The Europeans are also making progress. While friendly nations will try to share a successful product—to a point—the U.S. can’t rely on vaccines from China or even Europe being available in America quickly. So it’s important to take steps to speed up progress in the U.S., and to prepare to manufacture such a vaccine on a global scale. A more prepared U.S. could inoculate Americans quickly and share the product with others, particularly low-income nations that can’t develop their own vaccines and need protection.

More than 70 companies and research teams are working on a vaccine, but fewer than 20 have the experience and manufacturing scale to pull a product through development. Only five or six operate primarily in the U.S., which means foreign governments might try to make a claim on a vaccine before America can. Each company is taking a slightly different approach, spreading bets and increasing the chance for success. (I serve on the board of one of them, Pfizer Inc. )

To win the race to a vaccine, America needs to engineer a development and regulatory process that is unprecedented in scope and urgency. Testing six or more candidate vaccines at once during a pandemic has never been tried anywhere. But it can be done.

First, the Food and Drug Administration should work with companies to conduct early safety testing while the vaccines are evaluated in laboratory and animal models to assess the full strength of their immunity. This parallel development process will save time and reveal more about the vaccines sooner. Regulators can also allow manufacturers to share common platforms for conducting the necessary studies. The FDA has developed good measures for potency using laboratory tests and animal models for the virus. These platforms should be adopted across industry, which will let regulators get clear answers more quickly.

Next, this effort will require novel approaches to clinical testing that allow us to build a large safety database and get an earlier answer on whether a product is working in people. Given that this vaccine will be deployed for mass inoculation of entire populations, a vaccine will need to be tested in tens of thousands of patients before it is approved for general use. An unsafe product could cause significant harm. The urgency to develop a vaccine quickly is eclipsed only by the need to make sure it is very safe.

Large Covid-19 outbreaks in American cities this fall may be inevitable. Against this grim backdrop, one approach to testing a vaccine is a “stepped wedge cluster.” Under this kind of clinical trial, a vaccine would be administered in the setting of an outbreak. The point is to provide some potential benefit while building a large and rigorous data set to evaluate its safety and effectiveness. This could be done as soon as a vaccine has cleared early safety trials.

The idea is to take a large number of doses and hold a trial in an outbreak city by serially vaccinating big groups of people—perhaps 25,000 at a time—with each cohort spaced two weeks apart, until 100,000 people have been inoculated over about six weeks. To see if the vaccine works, researchers compare the four groups and assess if timing of inoculation had a discernible impact on someone’s likelihood of contracting Covid-19.

The next massive challenge is making enough vaccines. Congress has set aside more than $3.5 billion for this purpose as part of the Cares Act. This allows the government to secure doses in advance of a product’s approval, which is essential for rolling out a vaccine the minute it’s approved. The money will be used to support investments in large-scale manufacturing. Johnson & Johnson recently announced a major collaboration with the Health and Human Services Department’s Biomedical Advanced Research and Development Authority to secure an early supply of vaccines. The government should also give grants to manufacturers with the most promising vaccines to rush the construction of large factories and other facilities.

I think there are some steps missing from his plan. For a massive trial in an “outbreak city”, don’t you need to know the prevalence? We don’t know that and if we stay on our present path we won’t know in three months or six months or a year, either. Otherwise how do you know what you’re measuring?

Or this:

China is making rapid progress, with three vaccines entering advanced development. Chinese officials say they could have a vaccine available for widespread use next year.

At this point how much would you trust a Chinese vaccine? How much would you trust their claims for it? How much would you trust whether what they’re producing is actually the same thing that they tested? Fool me once… I think the only thing we can do at this point is to ignore China.

My final misgiving was stated pretty well by G. K. Chesterton: anything not worth doing is not worth doing well. How confident should we be that, regardless of how great the prospective rewards, an effective vaccine can actually be developed? How do you scale up the production of something that cannot be produced?

We don’t know, for example, if having recovered from the virus conveys resistance. I would be a lot more comfortable if an effective vaccine for any coronavirus had been developed in the past.

I found this op-ed at the Wall Street Journal by T. J. Rogers interesting and timely:

Do quick shutdowns work to fight the spread of Covid-19? Joe Malchow, Yinon Weiss and I wanted to find out. We set out to quantify how many deaths were caused by delayed shutdown orders on a state-by-state basis.

To normalize for an unambiguous comparison of deaths between states at the midpoint of an epidemic, we counted deaths per million population for a fixed 21-day period, measured from when the death rate first hit 1 per million—e.g.,‒three deaths in Iowa or 19 in New York state. A state’s “days to shutdown” was the time after a state crossed the 1 per million threshold until it ordered businesses shut down.

We ran a simple one-variable correlation of deaths per million and days to shutdown, which ranged from minus-10 days (some states shut down before any sign of Covid-19) to 35 days for South Dakota, one of seven states with limited or no shutdown. The correlation coefficient was 5.5%—so low that the engineers I used to employ would have summarized it as “no correlation” and moved on to find the real cause of the problem. (The trendline sloped downward—states that delayed more tended to have lower death rates—but that’s also a meaningless result due to the low correlation coefficient.)

No conclusions can be drawn about the states that sheltered quickly, because their death rates ran the full gamut, from 20 per million in Oregon to 360 in New York. This wide variation means that other variables—like population density or subway use—were more important. Our correlation coefficient for per-capita death rates vs. the population density was 44%. That suggests New York City might have benefited from its shutdown—but blindly copying New York’s policies in places with low Covid-19 death rates, such as my native Wisconsin, doesn’t make sense.

I’ve highlighted the portion of the op-ed I think is most significant. The balance of the op-ed deals with Sweden and to my eye it contains a certain amount of handwaving so I have not quoted it. The fact remains that Sweden’s outcome has been worse than other, demographically, culturally, and geographically similar countries that adopted other strategies. That seems to me as close to a real world experiment as we’re likely to come.

It seems to me there are multiple questions worthy of consideration from a public policy standpoint. The first is whether putting “stay at home” directives in place early are effective? But that isn’t identical with the second question: how risky would it be to lift them? The final question is what should we be doing?

If you don’t like the op-ed, propose your own evaluation methodology. I’d be interested in seeing what you come up with.

I see that college law prof and Bloomberg columnist Stephen L. Carter has come around to a position I’ve articulated here. The companies who’ve been shut down by state and local governments have a case:

Why is everybody scoffing at the anti-shutdown lawsuits? It seems to me that they may have more of a point than critics seem to realize.

Consider the claims by shuttered businesses that continue to suffer losses — and in many cases face extinction — as shelter-in-place orders drag on. In their lawsuits, they essentially argue that by destroying their economic viability, the state governments have violated the Takings Clause of the Fifth Amendment to the U.S. Constitution, which requires just compensation when private property is taken for public use. The suits may not prevail; but they raise questions we should not ignore.

It’s true that the courts usually reject claims for compensation when the government restricts or even destroys private property to prevent the spread of disease. Cases involving the destruction of plants and animals are common. But almost always, the plants and animals are infected — or reasonably believed to be at high risk. In 1928, for example, the U.S. Supreme Court denied compensation after a state ordered the cutting down of ornamental cedars infected with a disease that would have caused enormous damage had it spread to a nearby apple orchard.

Ironically, the case was grounded in the need to protect the value of the state’s orchards, in which “many millions of dollars are invested” and “which furnish employment for a large portion of the population.” In other words, the justification for the destruction of the trees was the protection of the state’s economy.

Similarly, there will be times when no compensation is due even though properties are demolished entirely. In 1909, for example, the Supreme Court ruled that no compensation was due after the U.S. military commander in Cuba during the Spanish-American War ordered the destruction of several buildings to prevent the spread of yellow fever. There, however, the buildings were believed to be harboring germs; and the justices rested the outcome explicitly on the exigencies of wartime emergency.

Sounds pretty strong — but as it turned out, the claim of war did not bar all suits. In 1946, in a case called United States v. Causby, the justices ruled that the government had to pay damages for depreciation in the value of a farm adjacent to an airstrip for military planes. That the damage occurred during a national emergency made no difference. Nor did it matter that the farm was still useable; the compensation was due to loss in property value caused by low-flying planes.

Modern cases of this type rest heavily on the degree of economic harm. If the harm is small, the plaintiff loses. In 2009, for example, a federal appellate court rejected the claim of a Maine hospital forced by state law to serve indigent patients. The cost of the care was hundreds of thousands of dollars, but the judges pointed out that this amounted to only one half of one percent of the hospital’s gross revenues.

But this line of cases consistently notes that the outcome might be different if the economic harm is significant. In the coronavirus shutdowns, the harm is enormous. Many small businesses as well as some huge retailers are expected to fail.

The Takings Clause hasn’t always been held to apply to the states. It is only since 1978 that the Takings Clause of the Fifth Amendment

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury, except in cases arising in the land or naval forces, or in the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

in Penn Central v. New York City. The significant precedents that would rule against the plaintiffs are much, much older and rendered moot by Penn Central.

Whether they have merit or not, the inevitable lawsuits are going to tie up state and local governments for years.

All of which could have been avoided by a more prudent and thoughtful Congress. It’s easy to legislate to spend money. Legislating to do so prudently actually requires thought, consideration, and understanding.