Friday, May 29, 2020

The COVID-19 Pandemic and Its Impact on Social Security Funding

With just about everyone distracted by the COVID-19 pandemic, news about America's social safety net does not particularly garner any attention.  Nonetheless, on April 22, 2020, the Bipartisan Policy Center released its latest analysis on the state of America's Social Security system and how the COVID-19 pandemic will negatively impact the plan's financial health.

Let's start by looking at the most recent analysis of the fiscal health of the nation's Social Security trust funds as found in this report:

As it stands now, the lion's share of the money paid out as both retirement and disability benefits from the Social Security system comes from payroll taxes with a small amount of income from the taxation of benefits and interest earned on securities held by the trust funds.  Here is a table showing the payroll tax contribution rates for 2019:

According to the 2020 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, the OASDI program was paying benefits to 64 million people of which 48 million were retired workers, 6 million were survivors of deceased workers and 10 million disabled workers and their dependents.  While the Old Age and Survivors Insurance or OASI and Disability Insurance or DI are generally expressed as a single entity, OASDI, in fact, by law, the two funds are separate entities meaning that combined fund operations and reserves are hypothetical.   The total cost of the programs in 2019 was $1.059 trillion and total income was $1.062 trillion ($981 billion in non-interest income and $81 billion in interest earnings).  At the end of fiscal 2019, the plan had asset reserves (in U.S. Treasuries) of $2.897 trillion.  That said, under the Trustee's assumptions, Social Security's total cost is projected to be less than its total income in 2020 but higher than its total income in the years between 2021 and 2029.  Social Security's costs have exceeded its non-interest income since 2010.  According to the Trustee's calculations, the combined reserves of OASDI are projected to decrease from the current $2.897 trillion at the beginning of 2020 to $1.819 trillion at the end of 2029.  According to the Trustees' analysis, by 2035, the OASDI combined reserves will be completely exhausted with OASI reserves being exhausted in 2034 and DI being exhausted in 2065.  This could result in a significant cut in benefits.

Here is a graphic showing the declining cumulative value of the OASDI Trust Funds:

With that background, let's look at the analysis by the Bipartisan Policy Center.  BPC notes that the following changes have taken place since the COVID-19 pandemic began:

1.) Laid off workers do not pay payroll taxes (and neither do their employers) into the Social Security system.

2.) Workers that have seen their hours cut may also result in depressed payroll tax revenue since Social Security recipients pay taxes on their benefits only if their incomes exceed $25,000 ($32,000 for a couple filing jointly).  As well, retired beneficiaries have seen their interest income slashed thanks to the ultra-low interest rates adopted by the Federal Reserve in response to the COVID-19 pandemic, meaning that they will more likely find that their benefits will not be taxed.

3.) The aforementioned cut in interest rates by the Federal Reserve means that the Social Security trust funds will receive less interest income on the OASDI trust funds.

BPC analysts then look at what would happen to Social Security trust funds if (when) another recession takes place, using several variants of what happened during the Great Recession.  Here are the key assumptions:

1.) Over the next 10 years, Social Security revenue and excess costs from additional claims of retirement and disability benefits change as they did over the ten years between 2008 and 2017.  

2.) Adjustments were made for the added cost of higher numbers of older Americans claiming retirement benefits to reflect the growing number of Baby Boomer retirees since 2008. 

3.) Since the CARES Act temporarily increased unemployment insurance payments, the analysis assumed that disability insurance claims may not rise by as much as they did during the Great Recession.

4.) Since the coronavirus is likely to result in the deaths of higher number of senior Americans who will stop receiving Social Security benefits, the analysis uses an estimate of the number of seniors who will no longer receive Social Security because they are deceased.

Here is a graphic showing the OASDI end-of-year Trust Fund balance for two scenarios; one without the impact of the COVID-19 pandemic (baseline scenario) and one including the impact of the COVID (i.e. another Great Recession):

Here is a similar graphic showing the OASI end-of-year Trust Fund balance:

As you can see, the BPC analysis shows the following:

In the absolute worst-case scenario with a recession twice as severe as the Great Recession, the DI reserves would be depleted in 2022 and the OASDI combined reserves would be depleted in 2026.  

While we have no idea of the mid- and long-term impacts of the COVID-19 pandemic on the economy as a whole, at the very least, the prospect of a recession similar to that experienced in 2008 will result in the fiscal collapse of the Social Security Trust Fund.  Unless Washington moves quickly to address this financial imbalance, Americans of all ages will find themselves impacted by higher taxes, dramatic decreases in government-funded retirement and disability benefits or some combination of the two.  Thanks to the government's response to the COVID-19 pandemic, the pain is coming, it's just a matter of when.

Another fine example of an unintended consequence.

Thursday, May 28, 2020

Softening Up Americans for Forced Vaccination

One issue that has many of us concerned is the prospect of mandatory vaccinations as a solution to ending the COVID-19 pandemic, particularly since the testing process for a never-before-discovered coronavirus vaccine seems to be taking place at a greatly accelerated rate.  Nonetheless, it appears that at least some jurisdictions are "softening up" their citizens for that very likely prospect.

Let's open with this list of states showing what percentage of each state's residents got their influenza vaccination in 2018:

Over the years between 2013 and 2018, data from the CDC's Behavioural Risk Factor Surveillance System Survey showing that in 2018, on average, only 33.3 percent of Americans were vaccinated for seasonal influenza.  This information gives us some sense of how difficult it could be for Washington to allow American households to decide for themselves whether they wish to receive a newly developed and unprecedented vaccine for the SARS-CoV-2 virus.

Now, let's get to the topic of this posting.  Here is a document from the Florida Airports website that must be completed by each arriving traveller or member of a family:

Notice the highlighted portion of the document.  Under Executive Order 20-80 and the Florida Department of Health declaration of a Public Health Emergency, the State Health Officer and Surgeon General can order any individual to undergo the following:

1.) examination

2.) testing

3.) vaccination

4.) isolation

5.) quarantining

Under the aforementioned Florida Executive Order 20-80 which was issued in response to the COVID-19 pandemic on March 23, 2020, we find the following:

Note that EO 20-80 only refers to "isolation or quarantine" in Sections 1 Parts A, B, C and E, however, in Part E it states that:

" shall be the duty of every state and county attorney, sheriff, police officer, and other appropriate city and county officials upon request to assist the Department of Health in enforcing any isolation or quarantine or order of the Department of Health issued pursuant to this Order."  

The use of the word "order" opens up the ability of law enforcement and other government officials to force vaccinations on the public.

Now, let's look at the Florida Department of Health declaration of a Public Health Emergency dated March 1, 2020:

The declaration makes specific reference to quarantine and isolation, however, it does open the public up to "other interventions" which could well include forced vaccinations.

This is just a single example of the laws being passed by states that will ultimately "soften up" the American public and pave the way for forced vaccinations.  And, if you think that Donald Trump will come to Americans's rescue, here's a quote from the current president about MMR vaccinations during the April 2019 measles outbreak:

"They have to get the shots.  The vaccinations are so important, this is really going around now.  They have to get the shots."

According to the Centers for Disease Control and Prevention, this is how many measles cases resulted in such alarm:

Of the 1282 measles cases in the United States during 2019, only 128 cases ended up in hospitalization with 61 having complications including pneumonia and encephalitis.  By comparison to the COVID-19 case and death count, the measles outbreak was an insignificant event.

In closing, we also need to remember this comment from Donald Trump on May 15, 2020 when he introduced America's new vaccine czar:

"Another essential pillar of our strategy to keep America open is the development of effective treatments and vaccines as quickly as possible.  Want to see if we can do that very quickly.  We’re looking to — when I say “quickly,” we’re looking to get it by the end of the year, if we can.  Maybe before.  We’re doing tremendously well…

Then, my administration cut through every piece of red tape to achieve the fastest-ever, by far, launch of a vaccine trial for this new virus, this very vicious virus.  And I want to thank all of the doctors and scientists and researchers involved because they’ve never moved like this, or never even close….

This historic partnership will now bring together the full resources of the Department of Health and Human Services with the Department of Defense.  And we know what that means.  That means the full power and strength of military — the military.  And that — really, talking about the logistics — if we get it, when we get it.  That means the logistics, getting it out, so that everybody can take it." (my bolds)

Wednesday, May 27, 2020

COVID-19 and the China Blame Game

While what the Russian government actually says gets almost no traction in the Western mainstream media, some recent comments from Russia's Foreign Minister Sergei Lavrov provide us with some interesting insight into the current "China Blame Game" that is being promoted as the reason for the world's current coronavirus pandemic.

Here are some examples of the China Blame Game:

April 28, 2020 - UK Guardian headline - "Trump says China could have stopped COVID-19 and suggests US will seek damages"

April 30, 2020 - CNN headline - "Trump administration draws up plans to punish China over coronavirus outbreak

April 30, 2020 - Reuters headline - "Trump confident that coronavirus may have originated in Chinese lab"

May 4, 2020 - South China Morning Post headline - "US Secretary of State Mike Pompeo says "enormous evidence" coronavirus came from Chinese lab"

Last, but not least, in a different path of the anti-China COVID-19 narrative, here is a press statement from Mike Pompeo via the U.S. Department of State website:

...and, just in case you wondered, here is the aforementioned press statement by the Federal Bureau of Investigation about China's targeting of America's COVID-19 research organizations:

With that background, let's look at Russia's comments on the China Blame Game.  Here is the video showing an interview with Sergei Lavrov held on May 15, 2020:

Here is the transcript to the key portion of the exchange with all bolds being mine:

Question: On which side is Russia and why in the conflict between the US and China over possible contradictory data on the emergence and spread of the coronavirus?

Sergei LavrovWe are on the side of justice and common sense. Justice implies that it is wrong to accuse someone of something without the facts. I have given examples of the attitude of our Western partners who base their accusations on the declaration “highly likely,” which is how they accuse us of many things. I think the same applies to any situation where a country is being blamed for serious actions that affect lives but no facts are given. This attitude cannot be taken lightly.

A few words of common sense. This is not a time to be crying “stop thief!” and pointing fingers, it’s a time to cooperate and to develop a vaccine as soon as possible. Institutions in Europe, China, Russia, the US and many other countries are working on this. A kind of “prestigious race” is taking place – who will be the first? There are already manifestations of “national egotism” where the competition for being the first with a vaccine is not entirely scrupulous. There is information that the US has bought Sanofi, a French company, in the hope that it will be the first to develop the vaccine and that the US will get it. However, there are proposals from France and other European countries (which we share) that any positive result in this regard must be instantly made available internationally and the vaccine must be accessible to all. This is common sense without any selfish aspirations or attempts to derive a political benefit from this tragic situation.

I would like to recall that it was in late December that we learned from our Chinese colleagues about what was happening there (when they became convinced that this was really an epidemic). In January, specialists were already talking about it, in part, under the aegis of the World Health Organisation (WHO). In February WHO experts visited Wuhan. By the way, there was a Russian specialist in this delegation. So, it is at least inappropriate to say that the Chinese were concealing information from the WHO, or that the WHO did not know some things, or that it knew about the coronavirus but held back information. Needless to say, nobody could imagine the developments that led to this pandemic but it’s an unprecedented situation. Doctors were acting under conditions where the experience gained from other pandemics was not enough. This pandemic proved to be much more serious.

I think WHO experts must be supported and encouraged in every way rather than accused without grounds. This is especially true since the overwhelming majority of WHO Secretariat employees come from the countries that are the strongest critics of the WHO. They are demanding a drastic reform of the organisation, everything short of closing it down. Representatives of the US, France, Italy, Ireland, Spain, Australia, Portugal and Britain amount to over 30 percent of the WHO specialists, that is, people who deal professionally with epidemics and healthcare in general. The majority of Western countries have many more specialists there than they are entitled to by their quota. Out of about 2,100 specialists, one third come from Western countries. Italy, Canada and Australia have about 60 employees each. China has fewer than 40 and Russia has 20. Even if China or any other non-Western country had a malicious plan to use the WHO for its narrow interests, how can 40 people do this if they are confronted by over 700 specialists from Western countries, which are united by allied commitments in NATO and the European Union? I believe it is important to focus now on helping the experts and professionals to develop a vaccine instead of trying to derive some geopolitical, electoral or other advantages.

It is very clear that Russia is not part of the "China Blame Game" and that the country's leadership believes that it is most important that all nations work together to solve the crisis.  Fingerpointing is certainly not the way to solve the pandemic and is just another part of the new Cold War narrative  that is brewing in the halls of Washington. 

Tuesday, May 26, 2020

Job Reallocation Shock - The New Post-COVID-19 Economy

A working paper entitled "COVID-19 is also a Reallocation Shock" by Jose Marie Barrero, Nick Bloom and Steven J. Davis looks at the future of employment in the post-COVID-19 era using data from the Survey of Business Uncertainty (SBU) from April as well as anecdotal evidence gleaned from media coverage of the economy.  From this dataset, the authors have created a forward-looking measure of expected sales and job reallocation across the United States over the coming year.  For the purposes of this posting, I will only examine the authors' analysis of the job situation in the United States.

As the authors note, the coronavirus pandemic is resulting in the most rapid reallocation of labor since the end of the Second World War, thanks to the government-ordered shuttering of the economy.  This has meant that corporations and governments have been forced to mobilize millions of laid-off workers into new work activities that are needed in the post-COVID-19 era.

If we want to look at a historical perspective on job reallocation we only need to look back two decades or less.  Thanks to the economy shifting from mom and pop and smaller, independent retailers to national chains like Walmart, Target, Home Depot and Best Buy as well as online retailers like Amazon, employees (and owners) at the smaller retailers were forced into new jobs as their employers shuttered their operations.  

Let's start by looking at some anecdotal evidence of hiring and job reallocation:

1.) Walmart - hiring 150,000 new employees in one month (effective April 18, 2020) and plans to hire 50,000 additional employees.

2.) Amazon - hired 100,000 new employees in recent weeks and aims to hire another 75,000 employees.

3.) Lowes - plans to hire 30,000 new employees this spring.

4.) Instacart - adding 300,000 shoppers to its payroll.

Some companies are partnering up with other companies to exploit the reallocative nature of the coronavirus economy, particularly since spending on travel, hotels, rental cars, ride sharing and other related industries is down between 75 percent to 95 percent on a year-over-year basis:

1.) Kroger - partner with Sodexo, Sysco and Marriott International to hire workers laid off from hospitality and food service industries.

2.) CVS Healthcare is recruiting 50,000 new staff by partnering with the Hilton hotel chain.

3.) Uber is listing jobs for its unemployed drivers at McDonald's, 7-Eleven and Amazon.

Now, let's look at how the authors used the Survey of Business Uncertainty.  The SBU polls senior executives on a monthly basis in all 50 states and in every major non-farm industry.  Survey questions examine the forecasts of these executives for their own firm over the next 12 months.  The authors used these firm-level employment forecasts in the SBU to calculate the following:

"gross expected job gains at firms expecting to grow over the next year plus gross expected job losses and firms expecting to shrink over the next year minus the absolute value of the net change obtained by summing over all of the forecasts"

The firm-level forecasts in this calculation are then activity weighted and divided by aggregate employment to obtain the expected excess job reallocation rate looking forward over the coming year.

In the April 2020 SBU, two special questions were asked:

1.) the coronavirus impact on own-company staffing from March 1, 2020

2.) the anticipated coronavirus impact on own-company staffing over the next four weeks.

Cumulatively, the response to this suggest that there were near-term layoffs equal to 12.8 percent of March 1, employment and new hires equal to 3.8 percent of March 1 employment.  This means that the COVID-19 shock caused the hiring of 3 new employees for the layoffs of every 10 employees.  If contractors and leased workers are included, the ratio is about 2.7 new employees for every 10 employees laid off.  In January 2020, the expected job excess reallocation rate was 1.54 percent (average 2.23 percent between September 2016 and January 2020); this rose to 5.39 percent in April.  Gross staffing reductions are equal to 14.9 percent of March 1 employment (thanks to layoffs and furloughs) and near-term net job contraction (job losses plus new hires) is equal to 11.9 percent of March 1, employment with 92 percent of this contraction occurring between March 1, and mid-April.   Expected employment growth over the next 12 months fell 2.2 percentage points from January to April 2020.

Here is a graphic showing the expected employment growth rate and the expected excess job reallocation rate:

In closing, let's quote from the conclusions of the authors:

"Many of the American jobs lost since early March will return in the coming weeks and months as the pandemic and lockdown recede….temporary layoffs and furloughs account for 77 percent of gross staffing reductions from March 1 to mid-May. Recall that 27.9 million Americans filed new claims for unemployment benefits in the six weeks ending on April 25. 23 percent of that number is 6.4 million permanently lost jobs. Of course, there remains tremendous uncertainty about the economic outlook. For many firms, cash-flow problems today will become insolvencies in the future, and “temporary” layoffs will become permanent. The longer it takes to bring the economy back on line, the larger the fraction of recent layoffs that will turn out to be permanent…."

Using a different calculation, the authors found the following:

"To get a sense for the fraction of layoffs that will lead to actual recalls, we turn to evidence from Katz and Meyer (1990), who analyze a sample of UI recipients in Missouri and Pennsylvania from 1979 to 1981. They find that 72 percent of UI recipients who initially expected to be recalled were actually recalled. In addition, 13 percent of ex ante “permanent” layoffs were, in fact, recalled….According to this calculation, 42 percent of the gross staffing reductions.…will result in permanent job losses. Applying the 42 percent figure to the 27.9 million new claims for unemployment benefits in the six weeks ending on April 25 yields 11.6 million permanently lost jobs. This number does not include future job losses caused by the COVID-19 shock."

There is no doubt that many of these shifts in employment will reverse once the pandemic recedes and governments roll back their lockdown orders, some aspects of the changes to employment will persist into the future, particularly job reallocation which may or may not be to the financial benefit of workers.  Over the next year and into the future, millions of currently unemployed Americans are about to find out just how costly the governments' responses to the COVID-19 pandemic have been.

Saturday, May 23, 2020

Which Americans are Benefitting from the COVID-19 Pandemic?

Updated June 5, 2020

There is one very select group of Americans that have become significantly wealthier thanks to the COVID-19 virus.  While tens of millions of American workers are no longer working thanks to the shuttering of the economy, the Institute for Policy Studies found that five American billionaires have seen their wealth increase by staggering amounts.

Let's start by looking at the growth in the number of unemployed Main Street Americans:

As you can see, the unemployment level in the United States has reached levels that have never been seen during any prior crisis.  Over the eight week period between March 18, 2020 and June 4,  2020, over 42.6 million American workers have filed fro unemployment benefits..

On March 18, U.S. billionaires had a combined net worth of $2.947 trillion according to Forbes annual list of the wealthiest earthlings.  As of June 4, 2020, these same billionaires saw their total wealth increase by $565 billion or 19.15 percent.  Here are some of the beneficiaries of the COVID-19 pandemic:

Jeff Bezos of Amazon - up $36.2 billion

Mark Zuckerberg of Facebook - up $30.1 billion

Elon Musk of Tesla et al - up $14.1 billion

Steve Ballmer of Microsoft - up $13.3 billion

Larry Page of Google - up $13.7 billion

Sergey Brin of Google - up $13.9 billion

MacKenzie Bezos of Amazon - up $12.6 billion

Michael Bloomberg of Bloomberg LLP - up $12.1 billion

The world's most loved amateur virologist and vaccinologist, Bill Gates, also saw his fortune rise by roughly $11.8 billion.  Poor fellow.

Not only did these gentlemen see their net worth increase, over the eight week period, 14 new billionaires joined the United States billionaire list, bringing the total number up from 614 to 628. 

Let's take a quick look at the world's wealthiest man and his business.  According to Policy Matters Ohio, Amazon has become one of Ohio's largest employers.  Back in 2018, Policy Matters found that 1,430 of Amazon's then 6,000 plus workers in Ohio were getting assistance under the Supplemental Nutrition Assistance Program (SNAP) as shown in this press release:

The United States' richest people have seen their wealth increase by an amount that we can't even fathom since the COVID-19 lockdown began.  That said, at least we can all be assured that we are subjects to an oligarchy that has our best interests in mind and that only a fraction (81.8 percent to be exact) of the CARES Act funding will go to 43,000 of America's wealthiest people as shown here:

Thursday, May 21, 2020

Sunlight and the Novel Coronavirus

Thanks to research by the Department of Homeland Security, we now know one of the most effective methods for destroying the SARS-CoV-2 virus. 

Here is the title page from the document which was leaked to Yahoo News:

The Science and Technology Directorate is the primary research and development arm of the DHS.  Its mission is as follows:

"S&T’s mission is to enable effective, efficient, and secure operations across all homeland security missions by applying scientific, engineering, analytic, and innovative approaches to deliver timely solutions and support departmental acquisitions. Created by Congress in 2003, S&T conducts basic and applied research, development, demonstration, testing and evaluation activities relevant to DHS."

S&T is tasked with providing Washington with a chemical and biological defense program. Its biological defense is described as follows:

"S&T's focus in biological defense encompasses risk-based biological threat countermeasure development programs including threat characterization and development and transition of new and improved technologies, strategies, and procedures. These programs support multi-layered defense capabilities – threat awareness, prevention, surveillance and detection, forensics, and response and recovery – that address intentional or accidental introduction of biological agents that threaten the nation’s human national security. Hazards to the population through inhalation, dermal exposure and ingestion are within this mission."

In the document, the Science and Technology Directorate examines the emerging results from the National Biodefense Analysis and Countermeasures Center (NBACC) located at Fort Detrick, Maryland.  NBACC is part of the Department of Homeland Security falling under the aforementioned Science and Technology Directorate.  Its mandate is to defend the United States against biological threats, researching biological agents that may pose a terrorist threat to the American public. 

Here is a document which provides background on the NBACC:

With that background, let's take a further look at the document.  Here is a page summarizing S&T's research and development into the SARS-CoV-2 virus:

Here is a page showing how NBACC plans to research the characteristics of the SARS-CoV-2 virus:

Here is a page showing the results of the indoors surface stability analysis of the SARS-CoV-2 virus, highlighting the key results of the study:

Note that sunlight destroys the virus very quickly in indoor settings and that the risk of transmission from outdoor surfaces is lower during daylight hours.

Here is a page summarizing NBACC's findings when the SARS-CoV-2 virus is exposed to sunlight:

Note that sunlight reduced the SARS-CoV-2 virus to undetectable levels after just 3 minutes of exposure to the midday sun on a sunny day in the middle latitudes of the United States.

Here is a screen capture showing the results of the SARS-CoV-2 virus aerosol stability tests:

If you wish to read the entire summary document, please click on this link.

I find the NBACC's analysis fascinating.  It appears from their research that sunlight is a very effective means of destroying the SARS-CoV-2 virus.  Unfortunately, given that a very significant portion of the world's population is under lockdown thanks to the heavy handed response of governments, billions of people have limited exposure to sunlight.  As well, I cannot imagine that Big Pharma is thrilled with the idea of sunlight as at least a partial remedy for the SARS-CoV-2 least until they figure out a way to monetize the sun's light rays.