Monday, March 16, 2020

Wuhan Virus II - Flattening Theory & Unintended Consequences

My last post showed a bit of emotion on how I felt about forced closures of schools and businesses.  Now I would like to take a step back and address this at a more theoretical level.

First, people everywhere say that the government wants to flatten the curve of the spread of the Wuhan virus.  That means instead of a tall brief hump (e.g. a narrow gaussian curve) they want a long shallow hump.  China's situation showed that the tall brief hump might take 2 months--the time they took for the new cases to start significantly dropping.  I presume an anticipated flattening will then take 4-6 months or more.

The goal of flattening though is to prevent overwhelming the medical and hospital services.  Supposedly, a flattened curve will mean they don't run out of ventilators and other supplies and medicines and fewer people will die.  Thus pushing flattening is based upon prioritizing minimal loss of life.  But prioritizing one thing always de-prioritizes other things.

In a poorly run situation, those other things include the jobs of workers, the continued operation (versus bankruptcy) of businesses, and the income and taxes of those lucky enough to keep working.

How do I define a poorly run situation?  Panic directives made by local, city, and state governments.  We have plenty of disagreements at the national level that will minimize the chances of bad large scale fallout.

But we have a federal system that decentralizes many government decisions.

So when a local government decides to close schools, restaurants and retail establishments they consider non-essential, just to provide social distancing and minimize the spread of Wuhan virus, there are unintended consequences.

Take Ohio as an example.  They had 5 cases of Wuhan virus as of yesterday, and they closed all restaurants and bars in a 12 million person state. So .00004% of the population were sick with the Wuhan virus.  But they put what, a million people, out of work with a simple state directive.  Do you think this might be a bit too early in that curve when we are at the very start?  You've put those people potentially out of work not just one or two months (tall short curve) but up to 4-6 months (the flattened curve).  How many of you can survive on your savings for 2 months, let alone 4-6?  They are going to have to expand food stamps almost instantaneously to support those people.  And where does the money for those food stamps come from?  Have the feds authorized it yet?  I'm sure they will.  But you don't think they are going to raise taxes on those who still work?  And anyone that goes back to work later?

And how many of those restaurants and bars will survive a 4-6 month shutdown with no income?  Oh, you say the government will give them a loan.  I'm sure those owners just love the thought of paying back another loan, even if they were surviving on a cash flow basis and weren't paying off startup loans already.  But who pays for those loans?  More taxes.

Then as I mentioned yesterday, you have other closures, schools being the big one.  All those kids keeping mom or dad from working because they cannot leave the kids with the grandparents.  More loss of income, assuming you have a two parent family.  Loss of all income if you are a single parent.  And surely most essential workers are parents too.  Who fills in for them?

Think about the children and working age adult situation.  Children don't get any significant illness.  They can be a carrier and pass it on to their parents who are middle aged, almost all under 50 years old.  They don't get significantly ill either unless they have underlying medical conditions.  What you don't want is children or parents in close contact with grandparents (50-90 years old).  Most of them are not anyway.  Co-dwelling extended family groups are rare now in the US.  Most young people move out of their parents house when they get permanent jobs and grandparents stay in their own homes or move to assisted living centers.

Problem is, if the Wuhan virus does not mysteriously die out by late spring (as the flu does yearly), these local government directed closures are going to ruin the economies of their regions, and do great damage to the national economy.  But the economy reflects your livelihood.  Your chances of work, income, leisure, and freedom.  It's not just an abstract 'the economy.'

Now let's look at what might happen if local and state governments held off till they had serious problems.

People will get sick.  Most everyone will self-medicate unless they are over 70 or have serious other medical issues.  One Washington doctor said the number critically ill, requiring hospital or emergency care is now about 5%.  She thought the death rate might be as low as 0.1% or 1.0%--that is the percentage of those that get sick.

Everyone 70 and older (and most 60 and older) will self-isolate and stay in.  They can probably get food delivered to their homes or if they must, go out with gloves, masks, and sanitizers while staying away from people in public.

So let's say 50% of the population were to get the virus in the next 3 months.  I kind of think of that as a worst case, but whatever.  Out of 329 million people, that's 164.5 million.  The population 70 and over is about 10% of our total, actually around 35 million.  So if they acted like everyone else, 17 million would get sick.  But they don't act like everyone else.  They don't work and they won't expose themselves unnecessarily.  The 5% that get critically ill figure amounts to about 8.2 million of that 164.5 million.  So that seems a reasonable guess as to the number of elderly (over 70) that would actually get critically ill.  Of that number, 160 thousand to 1.6 million might die.  That compares to the number of deaths in the US annually of about 2.8 million.

According to the Internet, it takes about 3-6 weeks to recover (if you do) if you are seriously ill.  Assuming  a two week hospital stay for each, that allows for at least four 'turnovers' during a two month worst case hump.  So at any one time, about 2.05 million would need hospital care in an 'unflattened curve'.  Google says we only have about 900,000 hospital beds (way down from earlier years).

That is bad.  We really want to avoid the brief tall hump.  But spreading it out isn't intended to change the number of sick, only how many are sick at one time.  According to my calculations, you need at least a 4 month long hump to not overwhelm the hospitals.

But a 4 month hump with everyone out of work and home from school ruins the economy and YOUR livelihood.  I didn't even mention potential rampant inflation when the feds print money to cover all the loans and emergency help everyone needs, demands, and expects.

So closing schools and businesses early has a potential dark downside, the ruination of the US economy, that we need to avoid.  Sure, like Scott Adams said, he doesn't see individuals panicking.  But local politicians, driven by medical professionals that want to avoid overwhelming their hospitals, seem to believe that mandating separation at the expense of their citizen's livelihoods is a better short term measure.  Of course its not just medical professional advice, its fear and pressure from voters.  But I don't believe most of them weigh the risks and potential consequences.

They need to think longer term, and they need to think about individuals' jobs and income.  Flipping their panic switch too early will be way worse than waiting a bit too long.

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