Speaker 1: Hi, I'm Carol Masser and I'm Jason Kelly. It's time
Speaker 1: for this week's cover story, and Carol, I have to
Speaker 1: say it is a provocative one. Well, the US has
Speaker 1: gotten into a very bad place during the pandemic. No
Speaker 1: argument there, and no argument about the fact that there
Speaker 1: are no good exits, and I think it's safe to say, Jason,
Speaker 1: no argument too, that we desperately need to reopen the economy,
Speaker 1: yet doing so makes us vulnerable to a resurgence of
Speaker 1: the coronavirus. And in pushing for such a quick return
Speaker 1: to normalcy, President Trump chooses to frame the debate around
Speaker 1: lies versus livelihoods. But that's a false choice. According to
Speaker 1: Peter Coy in game theory, Trump is quote gambling on
Speaker 1: a resurrection. According to the story, the concept is that
Speaker 1: if you're playing from behind, big moves with only a
Speaker 1: small chance of payoff can make sense. And then Jason,
Speaker 1: under what Peter Coy calls the divider in Chief, Americans
Speaker 1: are fighting each other instead of the virus. And yet,
Speaker 1: as Peter goes on to write, our best laid plans
Speaker 1: for reopening the economy are worth nothing if they don't
Speaker 1: factor in how the virus will respond to that. Now,
Speaker 1: the virus simply isn't going away anytime soon, and our
Speaker 1: inability to deal with that unfortunate reality, well, it will
Speaker 1: only add to its costly birden And that's really Peter's argument.
Speaker 1: Where do we go from here? Trump is gambling on
Speaker 1: reopening the American economy early, even if it costs more lives.
Speaker 1: But that's a false choice. We can reboot and still
Speaker 1: be safe. Here's a realist's guide to getting through the
Speaker 1: pandemic by Peter Coy. David Rock, a mathematician at the
Speaker 1: University of California at Davis, has been watching President Trump's
Speaker 1: pandemic performance with a scholars interest. The president's touting of
Speaker 1: and now maybe even using the rheumatism drug hydroxy chloroquine,
Speaker 1: his musing about injecting disinfectants, and his egging on of
Speaker 1: armed anti shutdown protesters all look to Rock like a
Speaker 1: species of what game theory calls gambling for resurrection. The
Speaker 1: concept is that if you're behind in a game, say
Speaker 1: a presidential campaign, big bold moves can make sense, even
Speaker 1: if there's only a small chance they will pay off.
Speaker 1: If someone does stumble on a miracle cure for COVID nineteen,
Speaker 1: or the national economy somehow gets going by election day,
Speaker 1: then both Trump and the American people win. If the
Speaker 1: gambles fail, he's no worse off because he was probably
Speaker 1: going to lose the election anyway. As for the American people,
Speaker 1: they could wind up much worse off from his experiments.
Speaker 1: But if the president has a bad election day, that
Speaker 1: won't be his problem anymore. From the perspective of game theory,
Speaker 1: Trump's wager is highly rational, says Roc, who handled the
Speaker 1: math parts of a nineteen ninety five book on gambling
Speaker 1: for resurrection called Optimal Imperfection, Domestic Uncertainty and Institutions in
Speaker 1: International Relations, which he wrote with the late political scientist
Speaker 1: George Downs. On the other hand, Roc allows that the
Speaker 1: president may just be winging it. With Trump, he says,
Speaker 1: it's very difficult to tell how much is craft and
Speaker 1: how much is idiocy. The U s has gotten into
Speaker 1: a bad place from which there are no good exits.
Speaker 1: It desperately needs to reopen the economy, and yet is
Speaker 1: vulnerable to a resurgence of disease if it does so
Speaker 1: without careful preparation. The economy lost twenty point five million
Speaker 1: jobs in April, and the unemployment rate rose to fourteen
Speaker 1: point seven percent at the same time. As of May twentieth,
Speaker 1: there have been more than one and a half million
Speaker 1: cases of COVID nineteen in the US and almost ninety
Speaker 1: two thousand deaths versus fifty eight thousand in the Vietnam War.
Speaker 1: With the election approaching, it's reasonable to assume that Trump
Speaker 1: will double down on his gamble to get the economy
Speaker 1: to bounce back from what Bloomberg Economics calls the sharpest
Speaker 1: decline since World War Two. But what about everybody else?
Speaker 1: What's the right strategy for companies, Congress, state and local governments,
Speaker 1: and families As the US begins to reopen with the
Speaker 1: virus still on the loose. Consider this a realist's guide
Speaker 1: to outlasting the pandemic. There's actually a fair chance that
Speaker 1: Trump's bet will pay off. Let's say the number of
Speaker 1: new cases continues to fall nationally, as it has in
Speaker 1: most of the world because most people continue to take precautions.
Speaker 1: Deaths remain elevated in nursing homes, prisons, and crowded multigenerational housing,
Speaker 1: but the public regards that as an inevitable consequence of
Speaker 1: the pandemic and doesn't blame Trump. Democrats come to be
Speaker 1: seen as silly handwringers, or worse, obstructionists who tried to
Speaker 1: kill growth for political ends. Trump suddenly has a good
Speaker 1: shot at winning a second term. Two points about that scenario. One,
Speaker 1: allowing more vulnerable people to die is a choice, not
Speaker 1: an inevitability. Two, There's a risk that things will turn
Speaker 1: out much worse with a second or third national wave
Speaker 1: of infections that kills tens of thousands or more. The
Speaker 1: Trumpian framing device lives versus livelihoods is a false choice.
Speaker 1: Will some people be affected, yes, Will some people will
Speaker 1: be affected badly? Yes, Trump told reporters during a factory
Speaker 1: visit on May five. But we have to get our
Speaker 1: country open, and we have to get it open soon.
Speaker 1: In reality, reopening too soon is likely to cost both
Speaker 1: lives and livelihoods. The economy won't regain full strength if
Speaker 1: people remain afraid to leave home, or if fresh outbreaks
Speaker 1: force renewed closures. Other countries, from Iceland to South Korea
Speaker 1: to New Zealand have shown that stopping the virus cold
Speaker 1: first is the most effective way to save the economy.
Speaker 1: Even then, victory is not complete. China has imposed a
Speaker 1: new lockdown on more than one million people in its
Speaker 1: northeast amid fears that a flare up there may have
Speaker 1: been caused by a harder to detect version. While Trump
Speaker 1: aspires to refill stadiums with fans, the hard reality is
Speaker 1: that until there's a vaccine, life will have to be
Speaker 1: different and worse. Surviving the pandemic will be enormously expensive,
Speaker 1: not only in dollar terms, but in the changes people
Speaker 1: need to make, from mask wearing to isolation of the
Speaker 1: elderly two bands on large gatherings. Months after the outbreak began,
Speaker 1: the US remains short of reagents, swabs, and other materials
Speaker 1: needed for widespread testing, and lacks the infrastructure to trace
Speaker 1: the contacts of people who test positive, critical components of
Speaker 1: any reopening plan. Trump recently promised a vaccine by year end,
Speaker 1: but as a reality check, there are still no approved
Speaker 1: vaccines to prevent COVID nineteen's older cousins, twenty twelves mers,
Speaker 1: and two thousand and threes stars. We have to find
Speaker 1: ways to live with the virus for now, and this
Speaker 1: is the new normal. To Keishi Kasai, the World Health
Speaker 1: Organization's Regional director for the Western Pacific set in a
Speaker 1: briefing on May fourteenth, as long as the virus is
Speaker 1: circulating in this interconnected world, and until we have a
Speaker 1: safe and effective vaccine, everybody remains at risk. The International
Speaker 1: Monetary Fund estimates that shutdowns will destroy nine trillion dollars
Speaker 1: in world economic output in twenty twenty and twenty twenty one.
Speaker 1: If that's true, then the world saves three seventy five
Speaker 1: billion dollars for every month by which it manages to
Speaker 1: shorten them. That huge sum can be interpreted two ways
Speaker 1: as a reason to reopen right away, with safety as
Speaker 1: a secondary concern, or better as a justification for spending
Speaker 1: crazy sums to make the reopening safe. Opening only to
Speaker 1: shut down again just extends the pain and cost. But
Speaker 1: government spending that accelerates development of a vaccine or effective
Speaker 1: anti viral treatment, allowing the economy to open safely even
Speaker 1: a month or two earlier, will pay for itself many
Speaker 1: times over. Subsidize the construction of multiple factories for vaccines
Speaker 1: that are still undergoing testing just in case they pan out,
Speaker 1: even though most probably won't. Sure. COVID nineteen has changed everything.
Speaker 1: Things that made sense before the pandemic don't anymore, and
Speaker 1: things that were absurd before the pandemic are reasonable and
Speaker 1: realistic now. Spending gargantuan sums of taxpayer money is not
Speaker 1: wasteful at all. To screw imp is penny wise, pound foolish.
Speaker 1: The same logic argues for going big on aid to
Speaker 1: families and businesses that have been harmed by the virus.
Speaker 1: Some of the money will inevitably be caged by unworthy parties,
Speaker 1: providing fodder for investigative journalists and congressional committees. But in
Speaker 1: a crisis, the perfect can be the enemy of the good.
Speaker 1: There's even a public health angle. People who are managing
Speaker 1: okay in a lockdown because of help from the government
Speaker 1: won't be so desperate to reopen economies that will save lives.
Speaker 1: It's hard to imagine that running up huge government deficits
Speaker 1: could ever be a sound strategy. But then, the greatest
Speaker 1: policy failure of the pandemic has been a failure of imagination,
Speaker 1: an inability to grasp the magnitude of this disaster and
Speaker 1: the measures required to combat it. Trump was far from
Speaker 1: the only myopic leader in the early going. British Prime
Speaker 1: Minister Boris Johnson briefly gambled on letting the virus spread
Speaker 1: to achieve her community before coming down with COVID nineteen himself.
Speaker 1: Even now, the UK, Italy, and France have more fatalities
Speaker 1: per capita than the US does. New York City's terrible
Speaker 1: outbreak is partly the fault of Mayor Bill de Blasio
Speaker 1: and Governor Andrew Cuomo, who have feuded for years and
Speaker 1: reacted tardily to the virus. Cuomo pushed de Blasio to
Speaker 1: close city schools, but when de Blasio spoke of a
Speaker 1: shelter in place order for the entire city, Cuomo initially
Speaker 1: opposed the idea, saying on March seventeenth that no city
Speaker 1: in the state can quarantine itself without state approval. The
Speaker 1: imagination that was absent at the start of the crisis
Speaker 1: is more important now that the US is attempting to
Speaker 1: emerge from it. To defeat the virus, think like the virus,
Speaker 1: not literally, of course, since viruses don't have brains or intent.
Speaker 1: We just need to be aware that the best laid
Speaker 1: plans for reopening are worth nothing if they don't factor
Speaker 1: in how the virus will respond to them. Probing for
Speaker 1: weaknesses in society's defenses and flaring up in inconvenient places.
Speaker 1: A single infected person entering an unexposed population is like
Speaker 1: dropping a blob of ink into clean water. Kim Gang Lip,
Speaker 1: South Korea's Vice Minister of health, warned on May eighth,
Speaker 1: after an outbreak at nightclubs, by now we know what works.
Speaker 1: The pandemic fighting strategy that was pioneered by China and
Speaker 1: applied successfully elsewhere is to get the rate of new
Speaker 1: infections low enough that you can stamp out fresh flare
Speaker 1: ups through testing and tracing. If there are too many
Speaker 1: active infections, though testers and tracers won't be able to
Speaker 1: keep up. They'd be fighting a brush fire with a
Speaker 1: water pistol. That's why in Wisconsin, where cases have been increasing,
Speaker 1: Governor Tony Evers wanted to extend to stay at home order,
Speaker 1: but the state Supreme Court overruled him on May thirteenth,
Speaker 1: and residents flocked to bars and restaurants. In Texas, armed
Speaker 1: militia members have guarded some establishments that opened illegally to
Speaker 1: keep police from shutting them down. With Trump presiding as
Speaker 1: divider in chief, Americans are fighting each other instead of
Speaker 1: the virus. The risk, of course, is more waves of
Speaker 1: infections in the Spanish flu pen deemic of nineteen eighteen
Speaker 1: and nineteen, the second wave was bigger than the first one.
Speaker 1: Pragmatic way out of this political log jam could be
Speaker 1: truly massive testing enough to tamp down even a high
Speaker 1: infection rate. It could be coupled with contact tracing, which
Speaker 1: can be done using cell phone data as well as
Speaker 1: trained human tracers, some of whom could be people who
Speaker 1: lost jobs because of the pandemic. Mike Bloomberg, the majority
Speaker 1: owner of Bloomberg LP, is financing such an effort by
Speaker 1: New York States Department of Health, but tracing is costly
Speaker 1: and the US isn't prepared to do it on a
Speaker 1: massive scale. Fortunately, using nasal swabs to find and isolate
Speaker 1: asymptomatic carriers sharply reduces the spread of the virus, even
Speaker 1: if it's not accompanied by tracing of the carrier's contacts.
Speaker 1: According to simulations by New York University economist Paul Romer,
Speaker 1: to control this pandemic and any future pandemic, the U
Speaker 1: s should make the investment necessary to test people every
Speaker 1: two weeks, which would mean twenty five million tests per
Speaker 1: day on an ongoing basis. He writes, in a reopening
Speaker 1: road map. The US has done just over twelve million
Speaker 1: tests in total so far, according to the COVID Tracking Project,
Speaker 1: a volunteer effort launched by The Atlantic magazine to speed
Speaker 1: up a vaccine. Harvard economist Michael Kreamer and others advocate
Speaker 1: government co funding of research, development, and manufacturing. That's because
Speaker 1: vaccine makers won't invest as much as society needs them
Speaker 1: to if they bear all the risk. To make sure
Speaker 1: the companies have skin in the game, some of their
Speaker 1: compensation from governments would come at the back end, in
Speaker 1: the form of guaranteed, fixed price purchases of vaccines that
Speaker 1: meet standards of safety and effectiveness. Another way to accelerate
Speaker 1: things is a so called challenge trial of a vaccine,
Speaker 1: in which experimenters deliberately infect volunteers instead of waiting for
Speaker 1: subjects to get exposed by chance. A group called One
Speaker 1: Day Sooner has lined up thousands of young, healthy altruists
Speaker 1: who are willing to risk getting sick, and survivors of
Speaker 1: COVID nineteen with antibodies to prove it are stepping up
Speaker 1: to work amid contagion in the belief that they have
Speaker 1: at least some immunity. For business, the primary concern is
Speaker 1: keeping employees and customers safe while restarting the engines of commerce.
Speaker 1: One concept is the Qoran team, a small group of
Speaker 1: people who mingle with each other but remain socially distant
Speaker 1: from other quarrant teams. A more straightforward idea is to
Speaker 1: just keep working from home where that's possible. Video conferencing
Speaker 1: is here to stay. Jimmy Ethridge, chief executive officer of
Speaker 1: North America for Accenture, says his consulting organizations productivity metrics
Speaker 1: were higher in March and April than in January and February.
Speaker 1: Some jobs that require a physical presence can be restructured
Speaker 1: to minimize contact. It's already common in parts of the
Speaker 1: country for cashiers to be separated from customers by plastic shields.
Speaker 1: As punishing as a comprehensive shutdown is, it has the
Speaker 1: advantage of clarity. Reopening is baffling, who, how much, and
Speaker 1: when are all in question and influx. Trump has left
Speaker 1: the tough decisions to the states, despite tweeting in April
Speaker 1: that reopening is the decision of the president and later
Speaker 1: bashing Democratic governors who followed his own administration's guidelines in
Speaker 1: delaying reopening, police departments are being put in a difficult
Speaker 1: position having to enforce rules that are constantly changing as
Speaker 1: the pandemic itself changes. Police officers are not social workers,
Speaker 1: they're not homeless outreach coordinators. They're not medical professionals, says
Speaker 1: Monipha Bandele, senior vice president of Mom's Rising dot Org,
Speaker 1: which has protested heavy handed enforcement of stay at home
Speaker 1: orders in minority neighborhoods. As in the case of vaccine development,
Speaker 1: it's worth spending a lot of time and money to
Speaker 1: enable safe reopening because the cost of staying shut is
Speaker 1: so enormous. Thin doubt seating in offices, in public places,
Speaker 1: and on planes and trains is better than no seating
Speaker 1: at all. Likewise, why not carefully reopen schools but tell
Speaker 1: children who live with their grandparents or have other complications
Speaker 1: that they'll have to continue learning online. Better some students
Speaker 1: in the classroom than none. The end of social distancing
Speaker 1: increases the peril to residence of nursing homes because it
Speaker 1: means their staffs will be more exposed to the virus
Speaker 1: while at home, So why not pay workers extra to
Speaker 1: live on the premises. The government could help cover the cost.
Speaker 1: Speaking of cost, the war against COVID nineteen is not
Speaker 1: going to get any cheaper. Trump and the Republicans in
Speaker 1: Congress have supported heavy spending to fight the virus and
Speaker 1: the economic downturn, but they seem to be retreating before
Speaker 1: the battle is over. Senate Majority Leader Mitch McConnell opposes
Speaker 1: a three trillion dollars stimulus bill the House of Representatives
Speaker 1: passed on May fifteenth. It includes more than one trillion
Speaker 1: dollars for state and local governments, which are bearing much
Speaker 1: of the expense of fighting the pandemic, along with a
Speaker 1: new round of twelve hundred dollar checks for families. One
Speaker 1: reason the GOP opposes the bill is that it's stuffed
Speaker 1: with partisan measures such as reductions and immigration enforcement. Another
Speaker 1: is that Senators want to pause to gauge the effect
Speaker 1: of previous stimulus. It's always interesting to see how much
Speaker 1: patience some people have with the pain and suffering of
Speaker 1: other people, Speaker Nancy Pelosi said on the House floor
Speaker 1: before the vote. Deficit spending can be problematic, but in
Speaker 1: the depths of a recession, it's necessary. Even Federal Reserve
Speaker 1: Chairman Jerome Powell, who's paid to worry about inflation, said
Speaker 1: in a May thirteenth speech that additional fiscal support could
Speaker 1: be costly, but worth it if it helps avoid long
Speaker 1: term economic damage and leaves us with a stronger recovery.
Speaker 1: Gambling on a resurrection is one of the pathologies that
Speaker 1: can emerge from what finance types call the principal agent problem,
Speaker 1: the potential for misalignment of interests between the principle in
Speaker 1: this case, the American people, and the agent who works
Speaker 1: for them, in this case Trump. In business, the fix
Speaker 1: for a principal agent problem is for shareholders to have
Speaker 1: the information in power to control the CEO with COVID nineteen.
Speaker 1: A further complication is that the American people aren't speaking
Speaker 1: with one voice. The pandemic and the struggle over reopening
Speaker 1: are dividing Americans along familiar lines, Red States versus Blue
Speaker 1: Country versus City, Shaun Hannity versus Anderson Cooper. That's unfortunate
Speaker 1: because fighting the coronavirus requires a united effort. It thrives
Speaker 1: in an unprotected nursing home on a beach crowded with
Speaker 1: blithe young people, in a boarding house jammed with low
Speaker 1: paid migrant workers. From there, it spreads as with Injustice,
Speaker 1: an outbreak anywhere is an outbreak everywhere. Thanks for listening
Speaker 1: to our cover story. I'm Carol Masser. Be sure to
Speaker 1: check out the cover story along with the entire double
Speaker 1: issue of Bloomberg Business Week magazine. It's on newstands, it's
Speaker 1: on the Bloomberg and of course oways at Bloomberg dot com.
Speaker 1: And I'm Jason Kelly. Check us out every day on
Speaker 1: the radio, our daily Bloomberg business Week Radio show. It's
Speaker 1: a two p m. Wall Street Time. Also via podcast
Speaker 1: wherever you get your podcasts.