DÉJÀ FLU? THE POTPOURRI PANDEMIC

The straight path never leads anywhere except to the objective. ~ Andre Gide 

Every state is now relaxing or modifying in some fashion their Sheltering-in Place (ShiP) orders. The first state to withdraw its ShiP order was Georgia on April 24, others like Florida and Alaska followed the next week. Now all states are in this process, each following their own reopening paths.

In California that means localities are exercising Governor Gavin Newsom’s four-stage plan for reopening to some sort of newly-defined normalcy. The qualified good news is there’s a plan; the bad news is it needs to be followed. How will this happen? What’s in store with this “reopening”? No one really knows; everyone’s wandering down their own recovery road. Ultimately, it will be up to us consumers as we decide when and how much to partake in the nation’s commerce.

California’s current covid situation is quite mixed. Some areas have done better than others; no surprise for a state as varied and large as ours. According to Google, Californians have more strictly abided with ShiP orders than people in other states, with fewer visits to retail stores and pharmacies. 👍 However, on May 26 California was the only state that had more than one metro area in the NYTimes’s list of areas with the dozen highest daily growth rate of covid-19 cases; both cities are in Southern California.

New coronaviral cases have risen state-wide, despite extant ShiP orders. There’s no recent decline or even plateauing; they’ve steadily ascended since May 17. During the past four days coronavirus cases have climbed 44.4% in California. 👎 That result is hardly according to anyone’s plan.

The governor has announced California sits in a very large, very deep hole because of covid-19. This threatening cavity is an expected $54 billion (B) fiscal deficit, together with unemployment hovering above 20%. It means the state is already in a substantial, viral recession.

For perspective, this $54B deficit is by itself larger than 40 states’ entire 2018 budgets. This fiscal hole will require state-funded services to be reduced (when they should be expanded), budgets to be cut, furloughs and layoffs to occur and taxes likely increased especially for richer folks. Unfortunately, there aren’t enough richer folks even in California to fill the state’s colossal revenue hole.

Here’s a local example of one consequence: the Berkeley School Board is now engaged in the painful process of how to quickly cut 10% from its coming school-year budget, a reduced budget that somehow has to provide a viral-safe PK-12 education for its 9,500 students.

California’s viral recession, like most places, has been caused by both supply-side (producers) and demand-side (consumers) shutdowns, which is the objective of ShiP orders. It means economic recovery will require both stimulating producers and consumers to re-participate in economic transactions. It also very likely means such a recovery will not be characterized as a “V” (relatively quick). Nope, it’s more likely to follow an “L”. This is unfortunately consistent with the Federal Reserve Bank of Atlanta’s most recent real GDPNow forecast for 2020Q2 (April-June) of a staggering -40.4%. This is not a recession forecast, it’s a depression forecast.

When former governor Jerry Brown was asked what could be done about California’s dismal economic dilemma he said, “The response should be a Rooseveltian intervention and effort to mobilize the economy the best way we can.” These are fair, but fictional words, as Mr. Brown knows. Such broad-scale intervention requires big-time federal funding. The current occupant of the White House now has no intention of “intervening” with hefty heaps of fiscal largesse to assist true blue California, or for that matter any other state. In the unlikely but best of circumstance, #45 and Sen. McConnell might offer selective, non-Rooseveltian funds only after the state agrees to provide some politically-substantial payment in return; maybe a guarantee that each California recipient will receive a certificate with #45’s beaming, orange-ish image at the top. Oh my, that’s what having to deal with Beelzebub (aka, our Lord of the Lies) may come down to.

California is now relaxing its Stage 1 rules in most regions, leaving reopening decisions up to local authorities. The City of Berkeley, like the rest of the hesitant SF Bay Area counties, remains in Stage 1 through the end of May – we’re staying in our homes, attempting to flatten the now well-known curve. Nevertheless, the Stage 1 restlessness index is rising. The transition to Stage 2 will ease the ShiP orders and lift restrictions for lower-risk workplaces.

We’re at Stage 1.8 in Berkeley, and expect to enter Stage 2 soon, by necessity. We should also expect that as cities, counties and states open up, they might selectively move or reorient the official goalposts, changing imperatives to rid themselves of rules they cannot fully comply with, like Washington DC has done.

California’s tourist industry is the largest in the US. Oops, no one is touristing these days and hasn’t been for several months. I’m not alone in cancelling several trips. About 600,000 of California’s travel industry employees have lost their jobs. Hotel rooms in California’s famed Napa Valley are empty; on a recent weekday only 6% of the thousands of rooms in Napa were occupied. Vineyards’ tasting room revenues have been transformed into empty glasses; revenues have dropped 400%. Overall spending on California wines has fallen at least 25%. Vintners wonder how they’ll survive.

Such revenues are all highly-taxed. Travel-related tax proceeds are an important item for many California cities’ revenues, totaling about $12B last year; they won’t be anywhere near that level this year.

No matter what the official ShiP orders state, more people now are publicly walking, hiking, driving, meeting and interacting, even in Berkeley. Our masks-to-exposed-lips (MEL) ratio remains fairly high here, thankfully. I expect we’ll seep into Stage 2 without satisfying every one of the governor’s requirements.

Why? Because ShiP fatigue is at hand, people want orders relaxed and rules’ enforcement is a no-win proposition for anyone. Equally importantly, state, county and municipal budgets clearly necessitate it. The costs of ShiP continue to escalate. State tax revenues have greatly dropped, county property tax receipts are flagging, local tax revenues are unsustainably dwindling.

It’s not quite Exodus, but the fiscal waters parted when Berkeley, whose city council has consistently disdained the need for automotive transport (while sizably raising parking meter fees), stopped the collection of parking meter payments during Stage 1. It’s as if the city told residents please, please drive downtown to safely engage in commercial activity.

Unlike many people, my ShiP “quarantine” hasn’t been a binary change from full-time work to staying at home watching the artichokes grow. My change is one of degrees, because I’ve been retired for a while and have worked only part-time. Increasing numbers of people are unsick and tired of ShiP and want to re-engage in some hopefully-benign fashion. Beyond being simply stir-crazed, large numbers of folks need money that’s headed into their wallets from worked wages, no matter what their covid concerns. Increased income is everyone’s – workers and businesses – very top priority.

The policy “contest” between epidemiologists and economists that I previously characterized has rapidly edged into reopening, after following the epidemiologists’ prescriptions since March. According to one assessment, 25 million more Americans ventured out of their homes on any given day during the first week of May than over the prior six weeks. Nonetheless some steroidal epidemiologists believe, among other needed changes, cities should be thinking about installing new doors that don’t require grasping a handle and re-engineering traffic signals so pedestrians don’t have to push crosswalk buttons. They also suggest that meatpacking plants turn entirely robotic and paid sick time might become a necessity for jobs of all types.

Despite swimming in the deep end of daily pronouncements about covid-19’s treachery, much technical knowledge about the coronavirus remains unknown. Including how contagious and how deadly it is for whom, and under what circumstances infections can be mitigated for how long.

Epidemiologists remain unsure about how to answer the “What should I do?” question that has been posed since the pandemic began more than three months ago. The process of gathering and assessing relevant covid data has indeed been sped up. But as one scientist put it, “The pace of uncertainty reduction in science is way slower than the pace of a pandemic.” That uncertainty means people will favor safely reopening the economy, come covid or high water.
   In due course when we consumers gain enough disposable income and confidence, our demand for goods and services can grow, benefiting all of us. That hasn’t happened yet. US consumer spending dropped in April by 13.6%, the largest one-month decline since this data series began in 1959. This colossal reduction includes spending on durable goods, non-durable goods and services. 

Since #45 has selfishly rejected providing further federal government support or specifying how we are to re-engage commercially and personally, each state and locality is forging a distinct path forward. We can think of this now as our potpourri pandemic. Here’s hoping your and my paths deliver healthy benefits for us and many others.