Advisor Talking Points: Reopening The Economy vs. Public Health – This Is A False Choice

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As state governments are weighing the risks and rewards of lifting COVID-19 restrictions for pandemic-weary people, politicians, and many scientists are warning Americans that they are going to have to adapt to living with the Coronavirus as we all wait to be saved by a vaccine.

Without a vaccine, we know that new cases and deaths could go up again.   At best, a vaccine is realistically twelve-to-eighteen months away from being widely available.

Unfortunately, we cannot wait to reopen the economy—and remain in lockdown—for another year to year and a half.


Why Is The Stock Market So Optimistic The U.S. Reopening Will Be Successful?

So far, the government has used the blunt force technique of (1) shutting down the entire U.S. economy, and (2) forcing everyone to be restricted to their homes, to fight the epidemic.

As we are learning more about the virus, politician, economists, and public health scientists are starting to come to a consensus on two facts:

  1. This virus is not going away. No matter what the Administration says, “it is not going to disappear.”  Over the past few weeks, more and more top epidemiologists are stating that we are going to have to adapt and live with this virus—just like we do with the seasonal flu.  In the future, everyone in America will be exposed to this virus at some point, and like the flu, we will have to get a new COVID-19 vaccine shot every year.  The vast majority of people will have few or no symptoms.  Some, exposed to COVID-19, will feel like the two-week flu and then go back to work.  Others will have pneumonia-like symptoms and have to be away from work for a month.  In the end, almost all Americans will have to learn to live with COVID, just like we do the flu.
  2. Unfortunately, COVID-19 is 10x to 20x more deadly than the seasonal flu. However, almost all deaths are within a very specific and identifiable demographic.  Scientists are starting to realize that if we can quarantine and protect those specific demographics most susceptible to death, we can allow the rest of the population to restart the U.S. economy.


How Do You Strike A Balance Between Economic Life & Actual Human Life?

The economist and philosopher Amartya Sen has said, “the presence of disease kills people, and the absence of livelihood also kills people.”

As Americans, we need to have a tough national conversation about trade-offs and risks, and about lost lives and vulnerability.

Unfortunately, there are no perfect answers and no perfect solutions when you have an overwhelming crisis like this pandemic.

We have to get more comfortable talking about risks and trade-offs and the ethics of our decisions about reopening the economy and the possibility of new virus breakouts and deaths.

We have to get beyond the polarizing debate of choosing between treating the virus and reopening the economy.  We need to do both. We have to continue to fight the virus, protect those most vulnerable to death, and at the same time, reopen the economy.

We also have to develop more sophisticated tools to fight the virus rather than the crude, blunt force orders of completely shutting down the economy and holding Americans prisoners in their own homes.

We need “Pandemic Pragmatists,” who can balance the joint priorities of reopening the economy and fighting the virus and protecting those most at risk of death.

There will be compromises—there always are—between doing everything possible to save those most at risk of death and restarting normal life for the rest of society.


Politicians Make Life And Death Trade-offs Every Day

John F. Kennedy once said, “to govern is to choose between bad and worse.”

You have heard many politicians pompously state on cable TV news programs how they wouldn’t allow one person in their state to die in order to restart the economy.  What nonsense.

This is a false equivalency used by politicians and the media between saving lives by keeping the economy closed and sacrificing lives by opening it up in order for people to make a living once again.  Saving lives versus saving jobs is the wrong debate.

Every day politicians make life and death decisions and trade-offs in their legislation:

  • Everyone knows that if we lowered the national speed limit to 35 mph, we could save hundreds of thousands of lives every year. Politicians would never do that.
  • 37,000 Americans die every year in car accidents. But politicians haven’t outlawed cars because we have all learned to live with those 37,000 deaths.
  • When scientists proved that tobacco caused almost all lung cancer deaths, politicians would never ban the sale of tobacco products.
  • Politicians are forcing restaurants to social distance by keeping tables six feet apart. Let’s see if those same politicians will force airlines to do the same in their airplane seating.  Not likely.  The airlines have always had more effective lobbyists and make larger campaign contributions than small business restaurant owners.

Why can’t politicians be honest and admit that they make life and death, risk-reward trade-offs every day?  They now have to make those same tough decisions with COVID-19.

There must be some middle ground.  We sometimes miss the point of how interdependent health and the economy are to each other.

Health care workers understand that economics is a critical part of people’s health and well-being.  The financial and business community also recognizes and understands the value of having healthy workers and healthy families, both for short-term productivity and long-term viability.

So debating public health and the economy as a trade-off is not very helpful.  There has to be a way to create more sophisticated combinations of policy responses to preserve the best of our health system, the best of our economy, and to take into account the ethical considerations on how to best protect those most vulnerable to death.  These are tough political and ethical decisions, but they should not pit health and economic systems against each other.


What Is The Answer?  How Do We Do Both?

Now that Dr. Robert Fauci and other leading epidemiologists like Dr. Michael Osterholm, the director of the Centers For Infectious Disease Research, are coming to the consensus that this virus is not going away anytime soon and that eventually, everyone is going to be infected by it over the next few years.

He says we are going to have to live with it until 60-to-70% of the total population develops a “herd immunity,” either by catching the virus and developing antibody immunities or by being vaccinated against the virus and developing some immunity through the vaccine.  Only then will it slow or become less deadly, like the flu.


How Many Infected People Die From The Coronavirus? 

No one has a perfect answer.

One would think that all you have to do is divide the number of reported deaths by the official statistics on infected new cases.  If you did that, the morbidity rate would be about 6%.

But because of a lack of testing in the U.S., the official statistics on new cases only include people who had a severe enough infection to go to a hospital and received a COVID-19 test.

The statistics don’t include people who have been infected but have no symptoms (estimated at 43% of all infections) or who had minor flu-like symptoms and didn’t go to a hospital or were tested.

The current best estimate of the death rate from the Coronavirus in the U.S. is 1.3%, which is a calculation based on “cumulative deaths and detected cases across the United States,” according to a University of Washington in Seatle study conducted by Anirban Basu.  As a comparison, the annual mortality rate for the seasonal flu is about 13 times less at 0.1%.


What Are Your Chances Of Dying If You Get Infected?

COVID-19 is not an equal-opportunity killer.  The people who have died from this virus are from three identifiable demographic groups:

Patients With Underlying Pre-existing Medical Conditions:  According to the CDC and the New York City Health Department, 99.3% of ALL PEOPLE who have died from the Coronavirus have had underlying pre-existing health conditions.  This means every person who died, was ALREADY SICK before they contracted COVID-19.  36% of all Coronavirus deaths in New York were nursing home patients.

Older Patients 65-Years of Age or Older:  As of May 13, 2020, 71.1% of all deaths were patients 65-years of age or older with pre-existing underlying medical conditions.  24.9% of deaths were patients aged 45-64-years of age.  3.9% of deaths came from the 18-to-44 years of age group, and 0.06% of deaths were patients 0-17 years old.  The average age of all deaths from COVID-19 in Italy was 80-years old.

Minorities:  Latinos and African Americans have experienced higher death rates than the population as a whole.  But virtually ALL of the deaths, in these demographics, have been individuals who had underlying pre-existing medical conditions, like high blood pressure, diabetes, obesity, asthma, hypertension, and heart disease.  According to the CDC, people who have died from the virus with NO pre-existing underlying medical conditions was 0.9%.


The New Strategy:  How Do We Reopen Safely

Now that we realize we closed down the entire U.S. economy to protect 1.3% of the people infected by COVID-19 that died.

We need to rethink our one-size-fits-all approach to stay-at-home policies.  We also have to come up with a more targeted strategy to reopen the economy to those people least likely to die from exposure to the virus, while at the same time protecting those vulnerable demographics—who are real people—our families and neighbors.

To start, local governments should work as quickly as possible to reopen pre-K and K-12 schools.  Children still have a very low risk of falling seriously ill due to the virus, and the majority can and should return to school this academic year.

In Sweden, children who live with the elderly or other at-risk individuals are quarantined at home and go to school through internet distance learning.

Older, over 65-year old teachers and staff from vulnerable populations can also stay at home and teach through distance learning programs.

We should also reopen all workplaces and the rest of the economy to healthy, non-elderly individuals who don’t live with vulnerable people.  At-risk individuals with jobs should be able to continue to work from home or to receive paid medical leave.

And we should immediately reopen all businesses that can be safely operated while maintaining the appropriate physical distance between workers and customers.

Nursing homes are at exceptionally high risk for the Coronavirus.  They need completely new regulations to protect this vulnerable demographic.  In many European countries, roughly half of all deaths due to the virus have taken place in these facilities.  In the U.S., the share of nursing home deaths is lower, but in New York, 36% of COVID-19 deaths were attributed to nursing homes.   States must ensure that nursing homes get all the help they need to protect their residents, including regular testing for patients and staff.

While we’re reopening the schools and the economy to lower-risk individuals and protecting the vulnerable, we should make sure that we’re using modern public health techniques to help slow the spread of the virus. The most important of these is contact tracing.


Conclusion: The Economy Could Come Back Stronger Than Expected

The United States needs to aim for a more sustainable reopening strategy that it can practice until there is a vaccine or cure.

Many cable TV pundits repeat over and over again that the economy will take years to recover.

Until we get a vaccine, that is undoubtedly true for some industries like stadium sporting events, concerts, airlines, cruise ships, hotels, and many bars and restaurants.

But once we embrace the idea that almost all of us will be infected with the Coronavirus at some point and will quickly recover, we can start reopening almost all the economy, while still trying to protect that 1.3% of the population vulnerable to death.

For these reasons, I believe the economy will come back faster and stronger in the second half of this year. 

I also still believe the S&P 500 Index will end the year higher.

For investors, the best strategy is not to be panicked into selling but to ride out this economic disruption for the next few months and solely focus on your health and the health of your family.

We know this is a very fearful time, but B. Riley Wealth Management is here for you, and we will continue to share our stock market views every Monday. Thank you for reading.


NOTE: This report is authorized for distribution to clients

Paul Dietrich is the Chief Investment Strategist for B. Riley Wealth Management. B. Riley Wealth Management offers comprehensive financial solutions to clients through its network of over 160 experienced financial advisors across 13 states. The firm manages more than $11 billion in client assets and serves approximately 34,000 client accounts.


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