Between a Rock and a Hard Place
America is stuck between a rock and a hard place. The nation must decide whether to ratchet up enforcement of non-essential business closures or allow production to resume.
While we need to address the spread of the coronavirus with prudent measures such as social distancing and good hygiene, we must also reconcile this need with producing our economic needs. Furthermore, we must prevent our efforts from strangling the essential cash flow for families and businesses.
Two points come to mind. First, impoverished families who cannot make ends meet, will not be the ones to start or adapt a company to make surgical equipment, hospital beds, ventilators or respirators. They will desperately need money and thus will require a part of the stimulus package. Above all, these families need jobs, which means businesses need to operate. There is no other way for these workers.
Second, the $2 trillion stimulus package will eventually have to be recouped primarily through tax revenue. Those taxes are raised from individuals and businesses. With the mandatory closing of all non-essential businesses, the economy will stagnate, tax revenue will be drastically reduced and our out-of-control federal deficit will skyrocket.
The Plight of the Oil Companies
Other factors also complicate a recovery. One unfortunate development is the collapse of the oil market. Oil production and refinement constitutes nearly 8 percent of our nation’s Gross Domestic Product and provides 10.5 million jobs. Over the last decade, American oil production flourished. We are now the largest oil producer in the world, with 18 percent of the global output. The oil price dive could prove far more damaging to our economy than similar decreases in 1991 or 2008.
This collapse is due to a price war between Saudi Arabia and Russia. As a result, Saudi Arabia is increasing production by 3,000,000 barrels per day (bpd) while Russia has increased its output by almost 500,000 bpd. While this conflict harms both countries, it has also caused collateral damage for U.S. shale, Canadian oil and the U.K.’s offshore oil and gas markets by dragging Brent crude near $20 per barrel.
Thus, the oil industry is besieged by the virus that is collapsing demand and a growing glut. While most consumers are pleased by the drop in gas prices, the low cost of crude has already made it impossible for many oil companies to meet their debt payments. This situation could lead to the bankruptcy of many oil companies.
The Real Enemy is Fear
The real enemy, however, is the fear of the virus that is leading to a recession. Panic selling has already wiped out most of the gains achieved during the Trump presidency. No one knows what to expect in the future.
Much fear is fueled by the lack of definitive data on the virus. Nevertheless, liberal policymakers continue to make decisions without reliable data.
The most serious case of wrong data is that of epidemiologist Neil Ferguson from the Imperial College in London. He created the model that was used in the United States and the U. K. that served as the basis of many precautionary measures. He wrongly predicted that the U.S. alone would suffer 2.2 million deaths if nothing was done.1 He later radically downgraded that prediction to 200,000.
The hyperbole and drama created around the Ferguson model have served to fuel panic. Like crying fire in a crowded theater, this behavior is despicable. Monumental decisions need accurate information lest the policies do more harm than good.
Two Standards of Judgements
It appears two standards are used to deal with these crises. In April 2009, the H1N1 virus infected an estimated 61 million Americans resulting in 12,469 deaths. Other viruses have been even more fatal. No imposed work restrictions of all non-essential businesses have ever been imposed on past infections.
There is also a disagreement on what constitutes non-essential businesses. For some liberals, the list includes churches, charities, restaurants, hotels, manufacturing and construction jobs. However, these provide income for millions of Americans.
Much more perplexing is what has been labeled essential. Ironically, our leftist politicians feel that killing pre-born children at abortion clinics is essential. Meanwhile, Governor Ralph Northam has made it a punishable offense to attend religious services in Virginia but continues to allow liquor stores and marijuana dispensaries to remain open.
Yet another example of this double standard was the travel ban. On January 31, President Trump declared a national health emergency and imposed a travel ban to and from China. In response, presidential candidate Joe Biden accused him of “hysterical xenophobia… and fear-mongering.”2 This type of partisan sniping does nothing to find a solution to the spread of the virus.
At Some Point, We Need to Go Back to Work
At some point, we must stop eviscerating the economy and get people back to work. In addition to economic consequences, job loss crushes morale, creating mental health issues and increased danger of suicides.
Many have suggested that isolation be focused on the most vulnerable sectors of the population, while the rest re-enter the workforce. Egalitarian one-size-fits-all solutions favored by the liberal bureaucratic world will not work in the long run.
In the near future, our policymakers will have to re-open the supply chains and let businesses provide goods and services once again. The alternative is a panic that will only throw our country into more chaos and debt. Indeed, this is a war between two views of America rather than just a fight against a rogue virus from Communist China.