How COVID Kills the Economy

The problem isn't government "lockdowns."

1. Why We Need Another Stimulus

Compass Coffee is a small business success story. In 2014, two retired Marines started a small coffee roasting operation in downtown Washington, DC. They knew a lot about coffee and had a concept for a café where the baristas operated in the same kind of line as the people who make burritos at Chipotle.

It was a huge hit. The company opened cafés across the entire DC metro area and great at a rapid clip. By early 2020, the two Marines had 189 employees.

In March, they laid off 150 of them.

Compass Coffee is not a victim of “lockdowns” or overly strict government mandates. It’s a victim of the virus. The fact of COVID-19 has prompted a large percentage of the population to modify their behavior in perfectly reasonable ways.

For instance: If you used to work in an office with large numbers of other people and you can accomplish that work at home, many people now do that in order to cut down on potential exposure. This is a perfectly reasonable precaution that has nothing to do with a “lockdown.”

But working from home has downstream effects. For instance, there is an entire economic ecosystem of goods and services designed around high concentrations of office workers in urban and suburban settings. Businesses like Compass Coffee.

Here is a report on a recent afternoon at one of the company’s café’s:

It had closed at 2 p.m. after serving between 50 and 100 customers, down from about 1,500 on a pre-pandemic weekday.

Absent help, businesses like Compass Coffee will not survive the pandemic. Not because of people “allowing the virus to dominate their lives” but because the virus is a real thing and people are adjusting their lives to deal with it.

This week Regal Cinemas—the second largest theater chain in North America—suspended all operations.

This action was not the result of “government imposed lockdowns.”

What happened is this: People stopped going to the movies. Because there is a pandemic. And sitting in a windowless auditorium with a large number of strangers for three hours is the sort of needless risk that most people stopped taking. It’s the lowest of the low-hanging fruits.

When people stopped going to the movies, the production houses which make movies stopped releasing them. After the disastrous release of Tenet, more and more blockbuster films—No Time to Die, Wonder Woman 1984, Dune—had their release dates pushed back, again.

And because so much product is stuck in the pipeline, the production houses have mostly stopped shooting new movies.

And then—to make it all worse—there is a structural change happening with the timing of when movies can migrate from theaters to home viewing.

Last weekend the total box office take for all movies showing in North America was just over $9 million. Don’t blame lockdowns. Blame the virus.

On Monday I linked to this piece in the Guardian about just how bad things are for the airline industry. In case you didn’t read it, here’s a quick summation:

In 1998, airlines sold 1.46bn tickets for one kind of flight or another. By 2019, that number had shot up to 4.54bn. This year has undone it all. Early in March, the International Air Transport Association (Iata) published two potential scenarios. The more extreme one forecast a global loss of revenue of $113bn. By mid-April, about 14,400 passenger planes around the world – 65% of the global fleet – had been placed into storage, according to the aviation research firm Cirium. . . .

By June, Iata had to issue a revision: Revenues will fall by $419bn this year, precisely half of what airlines earned in 2019. . . .

By the end of the summer, the KLM group had announced 4,500-5,000 upcoming job cuts, out of its staff of 33,000 – a combination of layoffs, voluntary retirements, and terminations of temporary contracts. The scenario recurred across the industry. American Airlines plans to slash 40,000 jobs from its workforce. British Airways: 12,000 jobs. Qantas: 6,000. Ryanair: 3,250. 

And it’s not just the people who work for the airlines. It’s the staff at the airports. It’s the contractors who do catering. It’s the aviation companies that make planes and parts.

My point in all of this is that the economic devastation we are seeing nearly across the board (not counting a handful of tech companies) is entirely predictable and has nothing to do with government decrees.

It is a result of a base fact: Through a series of bad decisions and foolish actions, at both the level of government and a large percentage of the population, America has been hit harder by the coronavirus than any other industrialized nation. This outbreak has caused large numbers of people to change how they go about their lives.

And these changes have created enormous economic disruptions, everywhere: The people who used to work at a coffee shop in Washington; the people who work craft services for a movie studio in Los Angeles and now have no productions to serve; the people who make planes who are laid off from the factory.

All of these folks have to make rent somehow. And all of them, in turn, previously supported other businesses.

The only thing which will “fix” the economy is a vaccine. Nothing gets back to “normal” until then.

The only question is whether or not the federal government will spend the money to keep as many people and businesses as possible afloat until a vaccine gets here.

2. The VP Debate

Let’s get this straight: VP debates are to be used for entertainment purposes only.

They have no effect—zero, zilch, nada—on the election. Let me prove it to you.

In the advent of televised debates, there is only one iconic moment from a VP joust. It’s this one:

Utter brutality.

People remember Lloyd Bentsen’s “You’re no Jack Kennedy” line. What most don’t remember is what came next: Dan Quayle taking a standing 8-count, then trying to counter with “That was uncalled for, senator.”

After which Bentsen went Ivan Drago on him.

It’s amazing political theater.

Four weeks later the Dukakis-Bentsen ticket was blown out by 8 points. They carried only 10 states and the District of Columbia. Bentsen, a senator from Texas, was chosen as VP to give regional balance to the Democratic ticket. Dukakis-Bentsen lost Texas by 12 points.

This is just the most extreme anecdote. If you want more rigorous analysis, Harry Enten has it for you:

All of that said, the VP debates can be entertaining! Which is is why you should join us tonight for a post-debate livestream that’s only for Bulwark+ members.

3. Dexamethasone

DXM isn’t just for people who are sick. This 2013 piece from Outside is great:

By the time Jesse Easterling stumbled into the Mount Everest emergency clinic, he was nearly incoherent. It was a chilly afternoon at Base Camp, May 17, 2009—two days before the beginning of summit season, when a clear weather window would send hundreds of climbers scurrying up the south side of the peak. Easterling, a stocky 27-year-old insurance salesman from Seattle, entered the clinic—a simple tent staffed by two doctors—wearing a T-shirt and talking gibberish.

“What’s your name?” asked Dr. Torrey Goodman, 53, an altitude specialist from Hawaii in her first season working on the mountain. Easterling mumbled something. She asked again. “What’s your name?” More gibberish; he couldn’t stop fidgeting.

Goodman and the other doctor in the tent, Eric Johnson, a former president of the Wilderness Medical Society, were alarmed by Easterling’s appearance. His arms were covered by a rash. Johnson would later testify in Boise, Idaho, that Easterling had a “buffalo hump,” referring to an abnormal fat deposit on his neck. The doctors spent 30 minutes trying to get basic information out of him, but he couldn’t focus. “Why am I so bloated?” he kept asking. “Why am I so fat?”

“He was completely confused ... almost manic,” Johnson recalled in a deposition. . . .

The doctors immediately sent a Sherpa to Easterling’s tent to collect any drugs he could find. When the Sherpa returned, the doctors gasped: he was carrying a tray full of dexamethasone, also known as dex, a controversial anti-inflammatory steroid. . . .

Not counting Diamox, which carries minimal risk, dex is by far the most popular mountaineering drug. Banned by the World Anti-Doping Agency (WADA) but endorsed as a high-altitude rescue tool by the Wilderness Medical Society, dex works like most cortico-steroids, supplying synthetic cortisol to the body and suppressing inflammation. In the brain it stabilizes cell membranes, preventing fluid from leaking out of blood vessels into the surrounding tissue.

Read the whole thing.