Gerard Baker has coined a new term describing the much too often response to a real or perceived crisis in the world in which we now live: He calls it catastrophism, a condition produced in abundance despite a paucity of genuine catastrophy. And everyone participates, whether they have anything meaningful to say or not. And in the speculation about such events that we are now experiencing, he writes, a big part of the problem is the asymmetric risk-reward equation for the catastrophists because no one is going to care if the forecasters turn out to be overstating the threat by a factor of 100. But if our corporate and political leaders are underestimating the effect by a factor of 100, reputational damage will be irreparable and retribution awesome. For in the arena for what sells for news, as Steven Pinker has written, progress–which is captured in aggregate data and barely perceptible trends–isn’t news. Misery–conveniently anecdotal and picturesque–is. Very perceptive and worth remembering as we click around to our favorite talking heads.
I like best what the Wall Street Journal editorial board had to say on this: “Maybe we in the media should spend more time talking to the experts who know something and less time quoting politicians who know almost nothing about the virus but see potential gain in exploiting a health crisis.”
Meanwhile, in the real world of response to this crisis, I think that, in spite of his every day detractors who would like nothing better than to have this pandemic be “Trump’s Hurricane Katrina”, the President has done a good job in organizing and delegating the national response, particularly given the reality that no one yet knows when the spread of the virus will peak and recede. Essentially, this should be the responsibility of the nation’s health care leadership and I think Trump knows that and the rest of us should shut up.
However, I feel somewhat qualified to comment on one aspect of the response, that of the Federal Reserve boldly acting to reduce the federal funds interest rate by a half point in order to “stimulate” the economy. My view is that this is a message that the Fed will be willing to take bold steps as necessary to offset shocks to the economy by the spread of the virus and it might help consumers somewhat, but is unlikely to spur any boost to counteract the disruption in supply chains and the precautionary measures taken by authorities and the public. After all, interest rates are already pretty close to zero and monetary policy at this point has minimal incremental impact. And Sen. Elizabeth Warren’s demand side idea of stimulus spending is not the answer either, although her idea of spending on increased health care capacity for testing is OK, but we don’t need a boondoggle spending bill. A better idea is on the supply side, where Trump’s idea of a cut in payroll taxes might help, but even better than that would be a reduction in some of the unilateral tariffs he has imposed on our trading partners, which would be tantamount to an across the board tax cut for business and consumers, and it probably would have the additional virtue of being bi-partisan.