6 ways to combat corona mania
In the Herbert George Wells classic novel and its science fiction movie versions, “The War of the Worlds,” those invading aliens who are ravaging planet Earth are finally done in not by guns, tanks, the combined armies of all the countries of the world, or even nuclear bombs. Instead the savior was a microscopic infectious virus for which the mighty aliens have no immunity. One of the smallest organisms in the world saved us.
Today, our financial system and the global economy are getting clubbed by a tiny infectious strain of virus. Amazingly, this virus has liquidated some $10 trillion of wealth in stock market losses across the globe and potentially trillions of dollars more in lost output. The vulnerabilities we never even think of that can come in and wreak international havoc are stunning. Here are a few ways to help inoculate the country and yourself from the path of economic destruction fueled by coronavirus.
First, do not sell stocks in a down market. This is not to say that we have not hit the end of the selloff. It is probably not over. But it is long past the point of selling stocks, and the high likelihood is that, two, five, or 10 years from now, stocks will be a good deal higher than they are today. In every past health scare, from ebola to severe acute respiratory syndrome, once the virus is contained, the market and economy roar back to life.
Second, thank God we do not have a government run health care system in America. In China, the Communist Party controls the medical system across that land of one billion people, and it has bungled everything. The government has lied, panicked, and treated its own citizens like cattle exposed to mad cow disease. Communists have no regard for individual human life, and it shows in China. This is the second largest economy in the world, but you can be sure that the cure or vaccine will not be coming out of China. Think about this the next time you hear Bernie Sanders or Elizabeth Warren pitching “Medicare for All” on the campaign trail.
Third, temporary tax cuts and government spending will have no impact. Temporary tax cuts, like payroll tax cuts, will not have any real benefit. Keynesian stimulus plans have never stimulated the economy. Just ask former President Obama about his $830 billion debt bomb that failed to create a single net new job, according to his own administration.
Fourth, the Federal Reserve should inject the economy with dollar liquidity to quell a dollar shortage. Prices of things like commodities, from cotton to copper and silver to lumber, are down about 12 percent since the reign of terror of coronavirus began. Meanwhile, the 30 year Treasury bill selling at a 1.7 percent interest rate means that investors are betting there will be no hint of inflation for decades. Falling prices can be contractionary, and swift action by the Federal Reserve is advisable to keep the economy from collapsing. Its critical decision to cut interest rates today is a start.
Fifth, politicians should stop attacking pharmaceutical companies. It is not just Sanders or Warren who attack “Big Pharma” for their “obscene profits,” but even Republicans, including President Trump. We all want lower drug prices, and we should address the government policies that drive up drug prices. However, it is moments like this that remind us of the benefits of lifesaving drugs and vaccines. Anything that makes new drug development less rewarding, such as imposing price controls, slows the race for cures. Think about this question. How much would you be willing to pay for a vaccine that would inoculate you from the coronavirus?
Sixth, the fatuous attacks that Trump caused this virus to spread because of budget cuts are a new low in politics. It took the liberals at CNN and the New York Times about 15 minutes to find a way to blame the coronavirus on the president. The New York Times called the coronavirus the “Trump virus” because of some supposed budget cuts at the Centers for Disease Control and Prevention and at the National Institutes of Health.
The fact is that we are spending more on public health and on disease control and prevention than ever before in history. We will find effective treatments, as well as a vaccine, and it will most likely come from private companies in conjunction with the National Institutes of Health. Perhaps if so many tens of billions of dollars had not been diverted to such wasteful climate change research and away from preventing diseases, we would be closer to having treatments to new killer viruses like this one. This is just something to think about as our leaders work hard to contain it.
Stephen Moore (@StephenMoore) is an economic consultant for Freedom Works and served as an adviser with the 2016 campaign of Donald Trump.
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