The (possibly lost) Coronavirus Opportunity


Pablo Pardo (Washington) | If there is a politician in the United States who has represented the idea of power for power’s sake, with little or no ideology, this is someone barely known in Spain: the former leader of the Democratic parliamentary group in the House of Representatives, former chief of staff with Obama, and former mayor of Chicago, Rahm Emanuel. Rahm Emanuel’s theory for history, which sums up better than any treaty by Machiavelli or Hobbes what a politician should do: “Never waste a crisis”.

Emanuel arrived at the White House in 2009, at a time when the United States was destroying 9,000 jobs a day. The then largest banks in the country, Citigroup and Bank of America, were nationalized, and General Motors and Chrysler had just experienced a massive injection of public capital. As Ed Yardeni, former chief economist of Deutsche Bank for the U.S., explained this week in a note to his clients, what Emanuel wanted to indicate was that the crisis “was an opportunity to boost programs that otherwise would never have been implemented”.

Now, Covid-19 could be a great opportunity for the United States and, also, for the world economy. With interest rates nearing zero, this could be a good opportunity to use fiscal policy to revive the economy. This is something that the defenders of the so-called Modern Monetary Theory, such as the former chief economist of the International Monetary Fund, Olivier Blanchard, and also many banks, have been calling for for years, seeing how their margins are disappearing due to ultra-low interest rates.

Also, at least in the United States, this could be an opportunity to undertake a reform of which absolutely nobody talks, but which makes this country have, by far, the most expensive, dysfunctional and inefficient social protection system in the industrialized world. Take health care, for example:
There is a public-private system in which the costs are shared between the federal state and the 50 states (plus the semi-colonial territories, such as the District of Columbia, Samoa or the Virgin Islands) for people with low incomes: Medicaid. There is another public-private system for those over 65, Medicare, which in turn is divided into two parts, Medicare Plan A (for hospital admissions) and Medicare Plan B (for outpatient visits).
In turn, all those who have served in the military are covered by another similar system, called TRICARE, while citizens who have served in wartime (even if they have not been in a theater of operations) have another public-private health coverage system provided by the Department of Veterans Affairs.

There may also be people who fall under three of these systems… as long as they are able to survive the paperwork. This is possible because all these administrations don’t communicate with each other. They don’t even have unified computer systems. That situation, typical of a developing country, adds to the surprising gaps in coverage they offer, which in turn has immense economic costs. This is something that has been made clear by the coronavirus crisis. The United States was slow to register cases. But on Wall Street, the general opinion was that, once the epidemic reached Europe, it was not going to forgive that country, no matter how much Donald Trump said nonsense such as “with the good weather in April it will go away”, “we are going to have a vaccine in a few weeks”, or, the best of all, “I have not touched my face for weeks”.

The reason for the investors’ skepticism was simple to understand for someone who lives in the United States, but incomprehensible for someone who lives in Europe: In the United States, going to the doctor, even if you have insurance, to make a normal visit, can easily cost up to 200 dollars, depending on the type of policy you have. Therefore, citizens try to avoid getting closer to a doctor than Italians do to someone who has sneezed. In addition, about 8.5% of the country’s population (27.5 million people) has no health coverage at all. It was therefore very likely that there were cases of infected people who did not know it, and who were spreading the disease.

Wall Street’s pessimism already has been impacted by some circumstantial but worrying facts. Among them was the refusal of Donald Trump’s government to send testing systems to areas that were supposed to be more vulnerable to the disease, such as the west coast, or the lack of security measures in the case of the repatriation of US citizens in Wuhan, the Chinese city where the virus originated, and on the Diamond Princess cruise.

Then there is the American propensity for conspiracy theories, which has created a wave of messages on the Internet saying that the virus is not a virus (something advanced by Trump, who has said that the 3.8% mortality rate estimated by the WHO “is a lie”, and that it is actually less than 1%), and that everything is an invention of the Democratic Party so that the stock market falls, the economy slows down and that the democratic party wins the elections. The big difference is that these “conspiranoids” are not blaming George Soros this time, but Bill Gates (the reason that the founder of Microsoft has literally “patented” a virus that paralyzes economic activity remains hidden).

So it’s no wonder that when the coronavirus arrived in Europe, the stock markets in the United States plunged. It was also the reaction to a bull market that defied logic and came from unlimited credit, tax reform that had cut capital gains taxes enormously, and unbridled public spending that brought the deficit from 3.5% of GDP to 4.8% in just two years. Traders were aware that 20% of Standard and Poor’s rated companies are exposed to the virus in China. So, if you add to that Europe and the US are not spared from this shock of drop in demand (people don’t travel, don’t leave home and consume less because of the disease) and less supply being produced (people don’t produce because they have to stay at home), which adds up to tremendous uncertainty.

Covid-19, then, could be the perfect occasion for the United States to act on its incredible inefficiencies in social protection. It is not even a question of spending more. It’s just about spending better. In fact, it is possible that the cost to the taxpayer would be less if the country’s health services were integrated. The coronavirus is also the perfect opportunity to put in place a universal European-style health protection system that allows for private insurance, something advocated by the virtually win assured Democratic Party White House candidate, Joe Biden. In fact, the state of California has ordered private insurers to take over, free of charge, the tests to diagnose Covid-19. Some Republicans have supported the idea.
So will the coronavirus open the door to universal public health care in the US? Maybe that’s asking too much.

About the Author

Pablo Pardo
Pablo Pardo is Washington DC correspondent of El Mundo. Journalist especialized in International Economics and Politics.