I have not had much time to write columns recently because I unchecked the retirement box and went back to being a CPA who had quite a hectic tax season. I wanted share some thoughts about our current situation. As a caveat, The Signal will likely publish this column a few days after I wrote it, so it is possible that some of what I wrote may be outdated by the time you read this.
About six weeks ago, my son got married. One of the bridesmaids is an epidemiologist at UCLA. At the wedding rehearsal dinner, she and I spoke at length about the COVID-19 virus and the progression of the disease. That was the first time I heard about “flattening the curve” and all of the concepts that are now commonly understood.
She was emphatic about the need to socially isolate the entire population; failure to do so would likely expose a greater percentage of the population to the disease. She estimated that at least 40% of Americans would be infected within 12 to 18 months, after which we would either develop herd immunity or a vaccination.
She also emphasized that those conclusions were based on the “best available data,” but as better data emerges, the hypothesis and conclusions are likely to be revised. This is an important point because I am familiar with the concept of using best available data.
Before I retired, my practice was centered on public real estate companies. About 15 years ago, the IRS accelerated the due date for those companies to provide tax information on their owners. In many instances the information had to be provided before the clients closed their books.
We used to joke that these returns were “BAD” returns because they were based on the Best Available Data. For clients having reliable data, the returns were pretty accurate. Other clients provided us with incomplete or erroneous data. Those returns were truly bad. Data quality is paramount.
So far, what I heard during that dinner conversation about the COVID-19 virus has proven to be fairly accurate, so I am confident that the conclusions expressed by this bright young lady are based on reasonably reliable data. But in today’s world, not everyone operates from the same set of facts, so part of the challenge is to base our actions on the best available information when contradictory or incomplete data is presented.
Six weeks ago, the epidemiologist told me that our government was pursuing a belated course of action. Back then, the government acted as if we could still prevent the disease from coming to America by banning travel from infected locations. However, it was highly likely that at least several hundred asymptomatic carriers of the disease were already here. Given the exponential growth rate of infection, the policy the government was pursuing in mid-February was simply too late. Was the government really acting based on the best available data?
As a numbers guy, I am struck by the grisly statistics on the right hand of the television news screen. The global fatality rate is near 4%, while the U.S. rate is about 1.7%. If 40% of Americans eventually get the disease, with a 1% death rate, 1.3 million Americans will die.
But are those percentages overstated? What about the people who have not been tested? Perhaps the mortality rates are not as bad as we think. On the other hand, are the people who are infected representative of the population as a whole?
Irrespective of how this pandemic ends, America will be changed. I suspect that we will view health care delivery from a different perspective.
The last time we experienced a coronavirus pandemic was the SARS outbreak. While SARS is different from COVID-19, it is genetically related. Several pharmaceutical companies were developing a SARS vaccine that may have been effective against other types of coronaviruses. They halted their efforts for commercial reasons. We know that coronaviruses are capable of becoming future pandemics, so why shouldn’t the government make it a top priority to finance coronavirus drug development and pursue a coherent plan to deal with future coronavirus pandemics?
Finally, let’s consider the cost of dealing with this pandemic. Very few are focused on this. I would not be surprised if the costs add $5-10 trillion to our national debt. Our national debt is currently $22.7 trillion. Our economic output for 2020, measured by gross domestic product, was expected to be about $23 trillion before the pandemic.
When the national debt exceeds GDP by a large margin, the federal government loses its ability to spend on discretionary items because so much of the federal budget is spent on servicing the debt. This will have serious economic repercussions, but that is a subject for another column.
Before we deal with those issues, we need to address the more immediate pandemic health concerns.
Please stay safe.
Jim de Bree is a Valencia resident.