Saturday, May 9, 2020

Local Businesses Opening at 25% Capacity

Since I predict (see my last blog) that infections will continue to rise, and so will mortality (slowly), during a reopening, there's going to be push-back to reopening businesses at full capacity.

So I just wanted to take a moment to think (and talk) about the impact of opening at 25 or 50% capacity.  A small retail store may not be impacted.  They probably only get a few people at any one time anyway.  That might not be true of a small retail store in a tourist area, where they are normally packed.

But consider just about any restaurant.  You have kitchen staff sized for anticipated breakfast, lunch and dinner crowds.  At 25%, you will never get anywhere near your peak crowds.  Only some of those kitchen staff will be needed.  Likewise with wait staffs.  You don't need nearly as many waiters or waitresses or cleanup folks.  So you've either made everybody part time or you've laid off quite a few of your full time folks.  My guess is you cannot rehire at more than 50% of what you employed pre-COVID.

Then there is the taxes that are charged on each sale.  The state/county/city is only going to bring in 25% of it's usual sales tax.  That assumes people feel safe enough to actually go out when the government thinks it's only safe enough to serve at 25% capacity.

Then there are the businesses that government didn't open when they opened some at 25% capacity.  The government is not getting any taxes or fees from those businesses.

So 25% is a big loss for government income.  It's a big failure to get people back to work.  And it's a real inconvenience to the public that wants a normal life back.

So a 25% capacity limit is going to be upped quickly by government.  They will go to 50% capacity within a couple of weeks.  Maybe three at most.

Remember, the loss in government income isn't just a new and larger deficit figure for those non-federal government units.  This isn't taking out a bond for a new arena, or committing to pensions 10 years down the road.  This is loss of daily liquidity for paying government employees.

And the most obvious government employees to most of you is police, sheriff and fire departments.  In some locations and localities, it will include water, sewer, garbage collection, and even electricity.  Not that they don't make you pay for some of those, but sometimes the municipality has taken over the utility and run it themselves.

So where are the municipalities, counties and states going to make cuts?  Can they make cuts without legislative action?  If they don't, where do the pay and benefits come from when the state is getting 10 to 25% of its normal income?

If your local government is run by democrats, my guess is they will try taking out bonds.  They will also expect the feds to bail them out before they file bankruptcy.  Maybe they will, but the republicans will generally be opposed to government bailouts.  Republican US senators (congressmen don't count since they are in the minority) may be willing to pay for COVID-19 health costs, but I do not expect many of them will want to reimburse states for lock down losses.

Anyway, no matter how much governments want to open safely, they are going to be squeezed hard if they don't start substantial re-openings soon.  My guess is the reluctant ones will use protests as their excuse to relax their lock downs.  The country will reopen, and it will reopen soon.

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