Where Do We Go From Here?

the coronavirus. And in pushing for such a quick return to normalcy, President Trump chooses to frame the debate around lies versus livelihoods. But that's a false choice. According to Peter Coy in game theory, Trump is quote gambling on a resurrection. According to the story, the concept is that if you're playing from behind, big moves with only a small chance of payoff can make sense. And then Jason, under what Peter Coy calls the divider in Chief, Americans

are fighting each other instead of the virus. And yet, as Peter goes on to write, our best laid plans for reopening the economy are worth nothing if they don't factor in how the virus will respond to that. Now, the virus simply isn't going away anytime soon, and our inability to deal with that unfortunate reality, well, it will only add to its costly birden And that's really Peter's argument.

Where do we go from here? Trump is gambling on reopening the American economy early, even if it costs more lives. But that's a false choice. We can reboot and still be safe. Here's a realist's guide to getting through the pandemic by Peter Coy. David Rock, a mathematician at the University of California at Davis, has been watching President Trump's

pandemic performance with a scholars interest. The president's touting of and now maybe even using the rheumatism drug hydroxy chloroquine, his musing about injecting disinfectants, and his egging on of armed anti shutdown protesters all look to Rock like a species of what game theory calls gambling for resurrection. The concept is that if you're behind in a game, say a presidential campaign, big bold moves can make sense, even if there's only a small chance they will pay off.

If someone does stumble on a miracle cure for COVID nineteen, or the national economy somehow gets going by election day, then both Trump and the American people win. If the gambles fail, he's no worse off because he was probably going to lose the election anyway. As for the American people, they could wind up much worse off from his experiments. But if the president has a bad election day, that

won't be his problem anymore. From the perspective of game theory, Trump's wager is highly rational, says Roc, who handled the math parts of a nineteen ninety five book on gambling for resurrection called Optimal Imperfection, Domestic Uncertainty and Institutions in International Relations, which he wrote with the late political scientist George Downs. On the other hand, Roc allows that the president may just be winging it. With Trump, he says, it's very difficult to tell how much is craft and

how much is idiocy. The U s has gotten into a bad place from which there are no good exits. It desperately needs to reopen the economy, and yet is vulnerable to a resurgence of disease if it does so without careful preparation. The economy lost twenty point five million jobs in April, and the unemployment rate rose to fourteen

point seven percent at the same time. As of May twentieth, there have been more than one and a half million cases of COVID nineteen in the US and almost ninety two thousand deaths versus fifty eight thousand in the Vietnam War. With the election approaching, it's reasonable to assume that Trump will double down on his gamble to get the economy to bounce back from what Bloomberg Economics calls the sharpest decline since World War Two. But what about everybody else?

What's the right strategy for companies, Congress, state and local governments, and families As the US begins to reopen with the virus still on the loose. Consider this a realist's guide to outlasting the pandemic. There's actually a fair chance that Trump's bet will pay off. Let's say the number of new cases continues to fall nationally, as it has in most of the world because most people continue to take precautions.

Deaths remain elevated in nursing homes, prisons, and crowded multigenerational housing, but the public regards that as an inevitable consequence of the pandemic and doesn't blame Trump. Democrats come to be seen as silly handwringers, or worse, obstructionists who tried to kill growth for political ends. Trump suddenly has a good shot at winning a second term. Two points about that scenario. One, allowing more vulnerable people to die is a choice, not

an inevitability. Two, There's a risk that things will turn out much worse with a second or third national wave of infections that kills tens of thousands or more. The Trumpian framing device lives versus livelihoods is a false choice. Will some people be affected, yes, Will some people will be affected badly? Yes, Trump told reporters during a factory visit on May five. But we have to get our country open, and we have to get it open soon. In reality, reopening too soon is likely to cost both

lives and livelihoods. The economy won't regain full strength if people remain afraid to leave home, or if fresh outbreaks force renewed closures. Other countries, from Iceland to South Korea to New Zealand have shown that stopping the virus cold first is the most effective way to save the economy. Even then, victory is not complete. China has imposed a new lockdown on more than one million people in its northeast amid fears that a flare up there may have

been caused by a harder to detect version. While Trump aspires to refill stadiums with fans, the hard reality is that until there's a vaccine, life will have to be different and worse. Surviving the pandemic will be enormously expensive, not only in dollar terms, but in the changes people need to make, from mask wearing to isolation of the

elderly two bands on large gatherings. Months after the outbreak began, the US remains short of reagents, swabs, and other materials needed for widespread testing, and lacks the infrastructure to trace the contacts of people who test positive, critical components of any reopening plan. Trump recently promised a vaccine by year end, but as a reality check, there are still no approved vaccines to prevent COVID nineteen's older cousins, twenty twelves mers,

and two thousand and threes stars. We have to find ways to live with the virus for now, and this is the new normal. To Keishi Kasai, the World Health Organization's Regional director for the Western Pacific set in a briefing on May fourteenth, as long as the virus is circulating in this interconnected world, and until we have a

safe and effective vaccine, everybody remains at risk. The International Monetary Fund estimates that shutdowns will destroy nine trillion dollars in world economic output in twenty twenty and twenty twenty one. If that's true, then the world saves three seventy five billion dollars for every month by which it manages to shorten them. That huge sum can be interpreted two ways as a reason to reopen right away, with safety as a secondary concern, or better as a justification for spending

crazy sums to make the reopening safe. Opening only to shut down again just extends the pain and cost. But government spending that accelerates development of a vaccine or effective anti viral treatment, allowing the economy to open safely even a month or two earlier, will pay for itself many times over. Subsidize the construction of multiple factories for vaccines that are still undergoing testing just in case they pan out,

even though most probably won't. Sure. COVID nineteen has changed everything. Things that made sense before the pandemic don't anymore, and things that were absurd before the pandemic are reasonable and realistic now. Spending gargantuan sums of taxpayer money is not wasteful at all. To screw imp is penny wise, pound foolish. The same logic argues for going big on aid to families and businesses that have been harmed by the virus. Some of the money will inevitably be caged by unworthy parties,

providing fodder for investigative journalists and congressional committees. But in a crisis, the perfect can be the enemy of the good. There's even a public health angle. People who are managing okay in a lockdown because of help from the government won't be so desperate to reopen economies that will save lives. It's hard to imagine that running up huge government deficits

could ever be a sound strategy. But then, the greatest policy failure of the pandemic has been a failure of imagination, an inability to grasp the magnitude of this disaster and the measures required to combat it. Trump was far from the only myopic leader in the early going. British Prime Minister Boris Johnson briefly gambled on letting the virus spread to achieve her community before coming down with COVID nineteen himself. Even now, the UK, Italy, and France have more fatalities

per capita than the US does. New York City's terrible outbreak is partly the fault of Mayor Bill de Blasio and Governor Andrew Cuomo, who have feuded for years and reacted tardily to the virus. Cuomo pushed de Blasio to close city schools, but when de Blasio spoke of a shelter in place order for the entire city, Cuomo initially opposed the idea, saying on March seventeenth that no city

in the state can quarantine itself without state approval. The imagination that was absent at the start of the crisis is more important now that the US is attempting to emerge from it. To defeat the virus, think like the virus, not literally, of course, since viruses don't have brains or intent. We just need to be aware that the best laid plans for reopening are worth nothing if they don't factor

in how the virus will respond to them. Probing for weaknesses in society's defenses and flaring up in inconvenient places. A single infected person entering an unexposed population is like dropping a blob of ink into clean water. Kim Gang Lip, South Korea's Vice Minister of health, warned on May eighth, after an outbreak at nightclubs, by now we know what works.

The pandemic fighting strategy that was pioneered by China and applied successfully elsewhere is to get the rate of new infections low enough that you can stamp out fresh flare ups through testing and tracing. If there are too many active infections, though testers and tracers won't be able to keep up. They'd be fighting a brush fire with a

water pistol. That's why in Wisconsin, where cases have been increasing, Governor Tony Evers wanted to extend to stay at home order, but the state Supreme Court overruled him on May thirteenth, and residents flocked to bars and restaurants. In Texas, armed militia members have guarded some establishments that opened illegally to keep police from shutting them down. With Trump presiding as divider in chief, Americans are fighting each other instead of

the virus. The risk, of course, is more waves of infections in the Spanish flu pen deemic of nineteen eighteen and nineteen, the second wave was bigger than the first one. Pragmatic way out of this political log jam could be truly massive testing enough to tamp down even a high infection rate. It could be coupled with contact tracing, which can be done using cell phone data as well as trained human tracers, some of whom could be people who

lost jobs because of the pandemic. Mike Bloomberg, the majority owner of Bloomberg LP, is financing such an effort by New York States Department of Health, but tracing is costly and the US isn't prepared to do it on a massive scale. Fortunately, using nasal swabs to find and isolate asymptomatic carriers sharply reduces the spread of the virus, even if it's not accompanied by tracing of the carrier's contacts.

According to simulations by New York University economist Paul Romer, to control this pandemic and any future pandemic, the U s should make the investment necessary to test people every two weeks, which would mean twenty five million tests per day on an ongoing basis. He writes, in a reopening road map. The US has done just over twelve million tests in total so far, according to the COVID Tracking Project, a volunteer effort launched by The Atlantic magazine to speed

up a vaccine. Harvard economist Michael Kreamer and others advocate government co funding of research, development, and manufacturing. That's because vaccine makers won't invest as much as society needs them to if they bear all the risk. To make sure the companies have skin in the game, some of their compensation from governments would come at the back end, in the form of guaranteed, fixed price purchases of vaccines that

meet standards of safety and effectiveness. Another way to accelerate things is a so called challenge trial of a vaccine, in which experimenters deliberately infect volunteers instead of waiting for subjects to get exposed by chance. A group called One Day Sooner has lined up thousands of young, healthy altruists who are willing to risk getting sick, and survivors of COVID nineteen with antibodies to prove it are stepping up to work amid contagion in the belief that they have

at least some immunity. For business, the primary concern is keeping employees and customers safe while restarting the engines of commerce. One concept is the Qoran team, a small group of people who mingle with each other but remain socially distant from other quarrant teams. A more straightforward idea is to just keep working from home where that's possible. Video conferencing

is here to stay. Jimmy Ethridge, chief executive officer of North America for Accenture, says his consulting organizations productivity metrics were higher in March and April than in January and February. Some jobs that require a physical presence can be restructured to minimize contact. It's already common in parts of the country for cashiers to be separated from customers by plastic shields. As punishing as a comprehensive shutdown is, it has the

advantage of clarity. Reopening is baffling, who, how much, and when are all in question and influx. Trump has left the tough decisions to the states, despite tweeting in April that reopening is the decision of the president and later bashing Democratic governors who followed his own administration's guidelines in delaying reopening, police departments are being put in a difficult position having to enforce rules that are constantly changing as

the pandemic itself changes. Police officers are not social workers, they're not homeless outreach coordinators. They're not medical professionals, says Monipha Bandele, senior vice president of Mom's Rising dot Org, which has protested heavy handed enforcement of stay at home orders in minority neighborhoods. As in the case of vaccine development, it's worth spending a lot of time and money to enable safe reopening because the cost of staying shut is

so enormous. Thin doubt seating in offices, in public places, and on planes and trains is better than no seating at all. Likewise, why not carefully reopen schools but tell children who live with their grandparents or have other complications that they'll have to continue learning online. Better some students

in the classroom than none. The end of social distancing increases the peril to residence of nursing homes because it means their staffs will be more exposed to the virus while at home, So why not pay workers extra to live on the premises. The government could help cover the cost. Speaking of cost, the war against COVID nineteen is not

going to get any cheaper. Trump and the Republicans in Congress have supported heavy spending to fight the virus and the economic downturn, but they seem to be retreating before the battle is over. Senate Majority Leader Mitch McConnell opposes a three trillion dollars stimulus bill the House of Representatives passed on May fifteenth. It includes more than one trillion dollars for state and local governments, which are bearing much of the expense of fighting the pandemic, along with a

new round of twelve hundred dollar checks for families. One reason the GOP opposes the bill is that it's stuffed with partisan measures such as reductions and immigration enforcement. Another is that Senators want to pause to gauge the effect of previous stimulus. It's always interesting to see how much patience some people have with the pain and suffering of other people, Speaker Nancy Pelosi said on the House floor before the vote. Deficit spending can be problematic, but in

the depths of a recession, it's necessary. Even Federal Reserve Chairman Jerome Powell, who's paid to worry about inflation, said in a May thirteenth speech that additional fiscal support could be costly, but worth it if it helps avoid long term economic damage and leaves us with a stronger recovery.

Gambling on a resurrection is one of the pathologies that can emerge from what finance types call the principal agent problem, the potential for misalignment of interests between the principle in this case, the American people, and the agent who works for them, in this case Trump. In business, the fix for a principal agent problem is for shareholders to have the information in power to control the CEO with COVID nineteen. A further complication is that the American people aren't speaking

with one voice. The pandemic and the struggle over reopening are dividing Americans along familiar lines, Red States versus Blue Country versus City, Shaun Hannity versus Anderson Cooper. That's unfortunate because fighting the coronavirus requires a united effort. It thrives in an unprotected nursing home on a beach crowded with blithe young people, in a boarding house jammed with low paid migrant workers. From there, it spreads as with Injustice,

an outbreak anywhere is an outbreak everywhere. Thanks for listening to our cover story. I'm Carol Masser. Be sure to check out the cover story along with the entire double issue of Bloomberg Business Week magazine. It's on newstands, it's on the Bloomberg and of course oways at Bloomberg dot com. And I'm Jason Kelly. Check us out every day on the radio, our daily Bloomberg business Week Radio show. It's a two p m. Wall Street Time. Also via podcast wherever you get your podcasts.