Coronavirus & Economics
 
Given the mass hysteria that we're getting from the media, I want to provide some thoughts and analysis on the coronavirus and the economy.  
 
But, first, I want to offer my condolences to those who have lost family members and loved ones to this new virus.  More people will be infected and additional lives will be lost.  Those impacted are in our prayers.
 
 
 
The Economy
 
This morning, the government reported that 273,000 new jobs were created in February.  That smashed predictions of 175,000 new jobs.  And there was more good news.  The jobs figures from December and January were revised upwards by 85,000 more jobs. 
 
Within minutes, the stock market rallied 2,000 points – not.  The pre-market was down 780 points and it remained down 780 points.  What in the world could explain that?
 
The answer is not that complex.  There were several new coronavirus cases reported in the United States in the last 24 hours, and to frightened investors that canceled out the fact that 273,000 more Americans were working last month than before.
 
Yet when it comes to the virus itself, there are reasons to feel cautiously optimistic. 
 

• The spread of the coronavirus in China is slowing. 

• Key economic activity is returning to normal.

• In countries with better healthcare systems, like South Korea, the death rate is much, much lower than the 3% figure that has been widely reported. 

• Children are not at great risk.

• Thousands of people are recovering every day, but those numbers are not being reported by the media. 

• People over 65 are at greater risk, particularly if you have heart disease, lung disorders, diabetes or other physical ailments.

 
But along with that good news is the reality that as tens of thousands of people in the United States get tested in the next few weeks, the number of reported cases is going to go up.  (And I believe, as a result, the death rate will go down.)  We will see the proof that for most people this is the equivalent of the normal seasonal flu or severe cold.
 
Thankfully, we are going into this health crisis in an incredibly strong position as today's report of 273,000 new jobs shows. 
 
 
 
The Response
 
In spite of the obscene efforts of the left to blame the administration for the spread of this virus, the fact is they have done virtually everything correctly to date.  In fact, the head of the World Health Organization yesterday praised President Trump's handling of the crisis. 
 
The one area where there was a lag was in testing kits.  That was due to an Obama era regulation that permitted only the Food and Drug Administration to develop tests for new viral agents.  The president quickly repealed this regulation to speed up the development of new test kits.
 
Sadly, even in a best-case scenario, it is going to take at least another 30 to 45 days to fully know with greater certainty the degree of damage done to the economy and to those infected by this virus. 
 
Like many viruses, it should die out when temperatures get above 75 degrees for a prolonged period of time.  By May and June, the worst should be over. 
 
In the meantime, virtually every economic report is likely to show a slowing economy.
 
 
 
What Else?
 
Work on a vaccine is quickly advancing.  But what else can be done? 
 
There is a lot of talk about the need for an economic stimulus program.  The president has hinted at tax cuts, but there has been some disagreement on timing.  I think we need to move forward now. 
 
One possibility would be a payroll tax cut so that millions of Americans would immediately have larger paychecks.  Under George W. Bush, taxpayers and families received stimulus checks in 2008.  It's not clear whether that actually worked. 
 
This idea may annoy fiscal conservatives, but you can make a case for setting up a $1 trillion emergency fund right now and getting that passed through Congress to deploy in whatever area makes the most sense. 
 
The 10-year Treasury bond is at 0.77%.  The inflation rate is 2.5%.  In other words, the federal government today can borrow billions of dollars at an interest rate lower than inflation. 
 
There is no better time to borrow the money to help the economy recover more quickly so that revenues come in more quickly so we can manage the debt.