Monday, September 28, 2020

The Long Term Financial Impact of COVID 19

 The rationale for the early opening of the country was economic: Our national economy could not afford to stay locked down. The actual truth is the exact opposite: Our national economy could not afford to open early.

Edward Renner

The Gross Domestic Product (GDP) of the US in 2019 was 21.747 trillion dollars. It was projected to grow by 2.2% in 2020 to 22.2 trillion dollars. That was before the economic impact of COVID 19 and the “stay at home” orders issued in March and April.

What Happened Then?

By the end of the second quarter of 2020 (June) the GDP has fallen to 19.408 trillion dollars, a direct loss of 2.4 trillion dollars to the economy, as officially compiled quarterly by the Bureau of Economic Analysis (BEA) of the US Government.

To put these numbers in perspective, the total budget for the Federal Government for the 2019-2020 fiscal year was about 4 trillion dollars. The expected revenue was about 3 trillion dollars, resulting in an anticipated deficit of about 1 trillion dollars to be added to the national debt.

The actual dollar costs of COVID to date can be estimated by adding the 3 trillion dollars stimulus to the 2.4 trillion reduction to the GDP, for a total economic cost of 5.4 trillion dollars from January to the end of June 2020.

What cannot be determined is the cost of each of the components of COVID 19 and the economic benefits of partially lifting restrictions in May and June. These impacts are imbedded in source data and could not be separately identified by the Bureau of Economic Analysis.

What we do know is the daily number of new cases occurring in the US in comparison to other countries of the world. The US chose to start reopening the economy much sooner than Canada, Europe and Asia, contrary to the criteria established by the Center for Disease Control based on scientific knowledge.

As a result, the number of new cases by the end of July swelled to the point where they are roughly double what the numbers were in May/June. The number of new cases then started to decline again once new mitigation measure were adopted in some states.

In contrast, other nations, such as Germany, stayed closed-down longer, brought the number of new cases under manageable control through mitigation measures, testing, and contact tracing. As a result, they are in the process of successfully re-opening their economies. 


Source: New York Times data base.

What Are the Financial Consequences of Re-opening too Soon?

The financial cost of COVID to the US economy before starting to reopen was about 500 billion dollars of lost GDP (CBO) and 2.5 trillion dollars of stimulus money, for a conservative estimate of 3 trillion dollars due to the first wave of new cases.

Using the costs of the first wave (3 trillion dollars) as an estimate, the surge of at least twice as many new cases after partial reopening would require a 6 trillion dollars stimulus to offset the loss of GDP, and to hopefully return us by Sept/Oct to where we were when we first started to re-open back in May/June.

However, since we started to reopen too soon, some additional amounts of costs and time would be required to stay closed down long enough to reduce the number of new cases to a manageable level to be able to safely open-up, like Europe, Canada and Asia countries have done.

The United States, at the very least, has made a 6 trillion-dollar mistake if we act immediately to bring the virus under manageable control. If we fail to do so, the cumulative costs will continue to grow. These are unnecessary, but real, cost that could have been avoided by following the scientific advice of health experts, like the other developed nations.

What Will Be the Long-term Effects of This Mistake?

 Before the virus, the Federal Government was expected to have a 1 trillion-dollar budget deficit for this fiscal year. However, with the 3 trillion stimulus the annual deficit for this finical year will be 4 trillion dollars, raising our total national debt to 101% of our GDP.

 If we add an additional 6 trillion-dollars new stimulus money to the annual deficit, the ratio of debt to GDP will be 127%. This is not sustainable, and it would require sever austerity measures that would likely push the economy into a recession.

 But, not containing the virus also has economic costs. The GDP of the US lost a record breaking 9.4% in the second quarter of 2020 (BEA). Unfortunately, as the price for our bungling, we have given our economic competitors who prevented a protracted COVID 19 impact – such as China and Germany -- a significant advantage for years to come.

 This is the unequivocal financial message we should be receiving from our Federal Government.

 Yet, beyond the unnecessary financial costs, the continued disruptions to our social and personal lives, and our deeply diminished position in the world, there are a still an undetermined number of needless deaths – perhaps in the 100’s of thousands – for our moral conscience to bear.

Our response to COVID 19 has been a collective national disgrace.

 Sources: Bureau of Economic Analysis: Table 1.1.5 Gross Domestic Product (page 5);  Gross Domestic Product, Second Quarter 2020; The Federal Budget 2020

Thursday, June 18, 2020

Excessive Use of Force by the Police

Police Reform Is Not an Intractable Problem

Edward Renner and Thom Moore

The killing of George Floyd filled the streets with protesters. Unfortunately, the nation has been here many times since the 1960s. Perhaps an example from then can provide an illustration of how to do better now.

A member of the Black Coalition challenged us “An ambush is being planned, and if it happens, more Black people than police officers will end up getting killed. What are you going to do about it?”

Thom and I were professors at the University of Illinois in Champaign/Urbana. At the time, there was outrage in the Black community. A small child was left alone in the house when Mrs. B, a Black mother, was arrested on her front porch for assaulting a police officer who had asked to talk with her son.

As we learned later, whenever the police use force, they will often charge the person they had harmed with assaulting a police officer or resisting arrest. The Prosecution would then drop those charges in exchange for a guilty plea of disorderly contact, and any complaint against the officer was officially resolved with no recourse. That was the case with Mrs. B, and was the reason prompting the visit from the member of the Black Coalition.

Clearly, there were racial issues with policing in our city. Then, no less than now, the challenge of “What are you going to do about it,” required at least a personal commitment and an honest answer.

The ambush – if it was ever considered -- never happened. In response to the challenge, Thom and I examined the previous four years of court records to identify every instance of assaulting or resisting a police officer and the name of the charging officer. If assaulting or resisting was an action initiated by the citizen, then every police officer should have had an equal chance of being the one dispatched to the scene. We went to the police department to obtain the data on patrol assignments that was necessary to calculate the probability statistics. It took over one year and required going through open hearings at meetings of the City Council.

When we crunched the numbers we found that the officer on Mrs. Bs porch was involved in so many of the cases where the arrested person “assaulted” a police officer or “resisted arrest” that the odds were one in a million that it could have happened that way by chance. Two other officers had one chance in 10,000 of encountering so many citizens who assaulted or resisted. (The results of this methodology were later published in The Journal of Police Science and Administration in 1975.)

We presented our finding privately to the Command of the Police Department. The Lieutenant in charge of records said “They have identified the three people we know are our problem officers, and we have not done anything about it. I think we should cooperate with the research.” The Chief agreed: “What records do you want?”

We replied, “If you give us access to the records, and we give you the results, you will be in exactly the same position you are now in with the three officers in question. You will know there is an issue, but if you attempt to deal with it, it will put you in an adversarial position with the front-line officers and the union, and you will be unlikely to do anything with the new information.” We suggested an alternative:

“Let us describe the results of our study to all the officers at the change of shift briefings. We will give each officer a confidential code number where they can see where they stand on the use of force in the probability distribution.”

Clearly, if the If the ambush had occurred, each officer could have been the one dispatched. They carry each other’s grief. That was no empty possibility. On one occasion the police had responded to a call in the north end and were fired upon. A photo of the patrol car, with the bullet holes, was on display in the police briefing room as a daily reminder

It is in each individual officer's best interests to find a solution to the problem. They collectively own the issue and must come to assume responsibility for it themselves. We agreed to work with the officers to help resolve community relations issues, provided the Command would create an internal culture to make that ownership possible.

The officers formed a community relations group to meet and work with us and our students. One of the projects was to have each officer interviewed by a student at the end of their shift to record any incident where the citizen did not behave in the way the officer anticipated. The collection of “critical incidents” provided a data base for categorization, analysis and public discussions about actual sources of potential conflict. One of the incidents would be handed out at each shift change for the officers to discuss with each other. One day, I was walking across the street while an officer was engaged with a citizen. He looked up and hollered: “Hey Renner, I have one for us here,” meaning an incident for the file.

The Command never knew the name of any individual officer on any data collection, but every individual officer personally knew where they stood. With this internal climate, the officers were assuming responsibility for their collective ownership of their relationships with the community. 

It seems strange – and perhaps unforgivable – for the need to be revisiting this story from fifty years ago. What we described was a project that involved the police, the university, and the community in a transparent, data driven exercise of discovery and change.

We submit that this is one example of what collaborative relationships can look like. These relationships are not only possible, especially with today’s data collection and communication capacities, but essential for both police agencies and their communities.

The simple conclusion of our project, published jointly with the Command in The Police Chief in 1976, was: Police Community Relations Is a Continuous Ongoing Process, Not a Product.

Edward Renner is a retired professor living in Hendersonville, NC., and Thom Moore is a retired professor living in Urbana, IL.