April 3, 2020

11 of Our Best Weekend Reads

Health care workers around the world are asking for help. “What do you want?” “PPE.” “When do you need it?” “Now.” They’re in desperate need of more PPE, also known as personal protective equipment. Stocks of the critical gear are disappearing during the coronavirus pandemic. Doctors say they are rationing gloves, reusing masks and raiding hardware stores. The C.D.C. has even said that scarves or bandannas can be used as protection as a last resort. “I’ve met the doctors, and talked with them every day. I think there’s an interesting challenge here in that, currently, there’s such a need that if they had anything, they would deploy it.” The cries for help are mobilizing a wide range of innovators, some of them even joining forces through online messaging platforms like Slack. These are engineers, doctors and even high school students from around the world. They come from all walks of life, but say their goal is the same. “It’s amazing because no one’s asking which country are you from? They’re just like, how can I help? What do you need?” They’re pitching in by crowdsourcing designs for masks, face shields and even ventilators that could be reproduced around the world. This is Nick Moser. He’s an active player in one of the maker groups. His day job is at a design studio. Now, he’s designing replicable face masks. “We’re focused on three products: a face shield, a cloth mask and an alternative to N95-rated respirators. The face shield is the first line of defense for medical workers. It protects against droplets. If a patient coughs, it’ll hit the face shield rather than them.” Some designs are produced using 3-D printers or laser cutters. “There you go.” Then, the prototypes are field-tested by health care workers. Even some university labs are experimenting with DIY techniques. A group at Georgia Tech is working with open-source designs from the internet to develop products. “My lab works in the area of frugal science, and we build low-cost tools for resource-limited areas. And now, we’ve realized that I don’t have to go that far. It’s in our backyard, right? We need it now. So this is a plastic sheet I have — not too different from what you would get out from a 2-liter Coke or a soda bottle. I actually bought this from an art store. It’s just sheets of PET, so we can cut these out. We are calling this an origami face shield, and it’s the Level 1 protection. This is one idea. There are multiple different prototypes.” “This headband can be reused, and a doctor or nurse could just basically tear this off and basically snap another one on. We’re hearing that, in some cases, that they go through close to 2,000 of these a day.” Because the need is growing so rapidly, the makers are also thinking about how to increase their production. “So how do we get from this one that someone made at home on a laser cutter or a 3-D printer, and then get it in the hands of thousands of doctors and front-line workers?” They’re working with mass manufacturers that can take their tested designs, and replicate them at a larger scale. “We’ve been on the phone talking to a number of suppliers, material suppliers. So I think one of the neat things that we’ve done is not only the design, proving that you can make it rapidly, but then also trying to secure the entire supply chains.” This is Dr. Susan Gunn, whose hospital system in New Orleans has even started its own initiative to 3-D print equipment. “So it starts with an idea. We put the idea into place. And then we make sure that it’s professional-grade first. Infection control is looking at it, and we’re making sure that we’re using the correct materials that would be approved by the C.D.C. and the World Health Organization.” Dr. Gunn says the gear is a safe alternative for those who might otherwise face a shortage. “We’re creating face shields and we’re creating these different PPEs, and we’re putting them in the hands where people felt like they needed them.” Another critical piece of equipment is the N95 mask, and the supply is dwindling fast. Nick and his team are designing a robust alternative for this mask that can hold any filter material, and be mass produced. “It is easily printable. This one is used in medical situations where there’s an actively infectious patient. So nursing homes or obviously I.C.U. units would be the target to receive these.” “These are really hard objects to manufacture because you’re going to give it to a nurse, and then I want to be really confident that it will not let a virus through, right?” This equipment is not approved by federal agencies, but the designers are testing their respirator prototypes for safety. “That was basically the first, almost the first question that was asked. Can we do anything that’s actually going to be safe and helpful?” Some makers are pursuing even more ambitious projects. An engineer named Stephen Robinson in New Haven, Conn., is working on designing ventilators to help patients breathe. Countries are facing a dire shortage of the lifesaving machines. Right now, these DIY ventilators are still prototypes. “So really, this should be thought of as the seed of an idea that could potentially be grown with, and absolutely requiring, the medical and the tech communities.” But they could become key if critical supplies run out. “We’re in very uncertain times, and I see explorations and projects as kind of an insurance policy that could potentially be leaned on if there was extreme circumstances.” Health care workers are hopeful that these efforts could prevent an even worse outcome. “We don’t want anybody — let’s be clear — to use a bandanna to protect themselves. I hope it never gets to the point where we have to wear a bandanna. And I don’t think, with this initiative that we will get there.” For innovators like Saad, the challenge is personal. “I just can’t stop. I have to do stuff. And then I’m currently at a hospital. That’s why I have this uplifting little flower portrait. We’re expecting a baby boy, and what do we tell him when he grows up about what we did when society needed us?”

Article source: https://www.nytimes.com/2020/03/27/briefing/11-of-our-best-weekend-reads.html

The U.S. Is About to Vastly Increase Its Debt. That’s a Good Thing.

“This is not permanently raising government spending,” said Louise Sheiner, a senior fellow at the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution. “It’s a one-time thing. A big one-time thing, but it raises the level of debt and doesn’t do anything to the trajectory of debt after that, which makes it less challenging in the grand scheme of things.”

Simple math shows why. If the national debt were to rise by $2 trillion compared with what had been forecast, and the government paid for it by issuing 30-year bonds at current rates, the debt service cost would be about $29 billion a year, a trivial amount in a $20 trillion economy. And unlike a private borrower, the government never need pay down its debt; theoretically the debt can remain on the books indefinitely so long as the cost of interest payments is manageable, which in turn depends on economic growth.

“We are certainly expecting a much faster accumulation of debt than we had previously,” said Mr. Foster, the Moody’s analyst. “But if this is effective, it will cushion the blow to growth, and the economy will pick up faster, and that would have positive spillover in terms of debt dynamics,” meaning the result of successful stimulus would be a larger economy and thus a lower debt-to-G.D.P. ratio than if the government hadn’t acted.

“At this stage, the government can’t be preoccupied with deficits,” he said. “The downside risk of an inadequate response is much more severe.”

“Public debt levels will have increased,” Mario Draghi, the former president of the European Central Bank, said in an essay published this week in The Financial Times. “But the alternative — a permanent destruction of productive capacity and therefore of the fiscal base — would be much more damaging to the economy and eventually to government credit.”

The $800 billion fiscal stimulus the Obama administration enacted starting in early 2009 was widely attacked for increasing the deficit. But the budget deficit peaked that year and declined over subsequent years as the United States economy recovered.

The Fed may one day need to raise interest rates and sell off its holdings of Treasury bonds to prevent inflation. But that would most likely occur at a time when the economy had returned to its pre-coronavirus trajectory and was seeing higher inflation levels than have been evident over the last decade.

Article source: https://www.nytimes.com/2020/03/27/upshot/stimulus-national-debt-coronavirus.html

Coronavirus relief bill: What it means for business

Businesses will also have to cede some control to the federal government in exchange for lifelines. Companies that borrow money are forbidden to repurchase their stock or pay dividends during the loan and for a year after it is repaid. They must not cut staffing by more than 10 percent through the end of September.

Loans to small businesses, with 500 employees or fewer, are limited to $10 million. Loans to cover salaries of over $100,000 wouldn’t qualify for forgiveness, and businesses must demonstrate that they had not recently laid off employees, or a smaller amount of the loan would be subject to forgiveness.

Businesses would not have to repay loans covering up to eight weeks’ worth of payroll expenses. That means that once businesses receive their loans, a new clock will begin to tick: They’ll have to use the money within two months to avoid repaying it; they also can’t pay any employee more than $10,000 in those two months if they want that amount to be forgiven.

Lawmakers also placed restrictions on compensation and pay increases for executives, moves intended to address one of the criticisms about bailouts during the 2008 crisis. But pay limits will not necessarily do away with multimillion-dollar paydays for corporate bosses.

Executives who made more than $3 million in 2019 could be awarded $3 million, plus half of any sum in excess of $3 million. As a result, a chief executive who earned $20 million in 2019 would be allowed compensation of $11.5 million. The restrictions would apply from the time the federal support began to one year after it ended.

Even as the government takes on an outsize role in overseeing companies, Mr. Mnuchin maintained that it should not be in the business of dictating what private companies did.

“We don’t believe in mandating and regulating certain big businesses,” he said.

And big business, despite its need for help, has seemed unwilling to cede too much control to the government. On Tuesday, Boeing’s chief executive, David Calhoun, suggested that he wasn’t interested in the government’s taking an equity stake in the company, despite the beleaguered state of the aerospace giant.

Article source: https://www.nytimes.com/2020/03/26/business/economy/coronavirus-relief-bill.html

‘It’s a Wreck’: 3.3 Million File Unemployment Claims as Economy Comes Apart

Days of calling have resulted in nagging busy signals. She is hoping that her claim made it through, and that she will receive aid within a few weeks, but she is not optimistic.

“There’s so many things up in the air right now, and it’s so stressful,” she said. “It’s a wreck.”

Despite the glitches, Thursday’s figures suggest the scale of the problem. In a single week, the pandemic wiped out a year and a half of job gains. The past two weeks’ claims alone would be enough to push the unemployment rate up to 5.7 percent from 3.5 percent in February — a half-century low that now seems like ancient history.

The worst could be yet to come. Mr. Herzon of IHS Markit said he expected a similarly large number next Thursday, when the Labor Department releases its report on new claims filed this week.

Some forecasters think the unemployment rate could hit 10 percent this summer, which would equal the highest level from the last recession more than a decade ago. Back then, it took nearly two years for the jobless rate to reach that height.

“What is really hard to fathom is just how fast these numbers are going to escalate,” said Carl Tannenbaum, chief economist at Northern Trust.

Still, while there is little doubt that the numbers will get worse in the short term, some economists remain optimistic that the pain will be relatively short-lived. The congressional relief package is intended to, in effect, press “pause” on the economy, allowing idled workers and shuttered businesses to keep paying their bills so that they can spring back quickly once the health crisis eases. If it works, the recovery could be relatively swift; if it doesn’t, the cascade of layoffs and business failures could stretch on far longer.

Quintina Moore-Caraway, a ramp agent at George Bush Intercontinental Airport in Houston, was at work on March 13 when her supervisor called her over. She was being furloughed, without pay, at the end of her shift.

Article source: https://www.nytimes.com/2020/03/26/business/economy/coronavirus-unemployment-claims.html

Fed’s Powell Says U.S. Must Get Virus Under Control Before Economy Restarts

The Fed committed to buying as many government bonds as necessary to soothe markets after ruptures appeared in Treasury and housing debt. It has intervened aggressively in the market for short-term loans between banks to keep that corner functioning smoothly, and it is using its emergency lending powers to backstop corporate bonds.

The aid legislation working its way through Congress would give the Fed money to ramp up those lending programs. The central bank had already announced facilities to help large corporations, small businesses and money market funds, backed by a Treasury Department fund containing $94 billion.

Now, it can scale up those programs with Treasury agreeing to take initial losses on any loans that go sour. Treasury Secretary Steven Mnuchin has estimated that the financing, $454 billion, could support more than $4 trillion in Fed operations.

“When it comes to this lending, we’re not going to run out of ammunition,” Mr. Powell said. “That doesn’t happen.”

His appearance at a fraught economic moment recalled a similar one by a predecessor, Ben S. Bernanke, during the depths of the 2007-09 recession.

Mr. Bernanke appeared on “60 Minutes” in March 2009, six months after Lehman Brothers filed for bankruptcy and seven before the unemployment rate would peak at 10 percent. Fed chairs never appeared in television interviews at the time, making it a momentous attempt to reassure the American people.

“I think we’ve averted that risk,” Mr. Bernanke said when asked if the country was headed into a new Great Depression. “Now the problem is to get the thing working properly again.”

Article source: https://www.nytimes.com/2020/03/26/business/economy/fed-powell-coronavirus-recession.html

How the Fed’s Magic Money Machine Will Turn $454 Billion Into $4 Trillion

“Losses look really, really bad,” Kathryn Judge, a professor at Columbia Law School, said in an email. “Most people are comfortable with the Fed providing liquidity, even a lot of it, to keep markets functioning.”

If the Fed does take on a risk but Treasury backs at least the first round of losses, it means the elected government is agreeing to the plan. That puts a veneer of accountability on the whole enterprise, giving unelected central bankers some cover.

While the $46 billion in Treasury-determined funding will go to specific industries, the Fed-tied money is likely to be used more broadly.

So far, the Fed’s emergency programs benefit wide groups: The Fed is buying high-grade corporate bonds, for instance, because such debt had become hard to issue or renew, threatening to choke off funding to a broad range of companies.

The goal is to keep critical markets functioning through the coronavirus crisis.

“The government has stepped into the breach in a dramatic way, and has made Treasury the Federal Reserve’s deputy,” said Peter Conti-Brown, a Fed historian at the Wharton School of the University of Pennsylvania. “The Federal Reserve has become your friendly neighborhood loan officer.”

Since you asked. When we say that the Fed “essentially” buys debt and makes loans with its emergency lending programs, it’s because the way many of the operations are structured is a bit complicated.

Legally, the Fed is not allowed to buy debt that is not backed by the government. To achieve a degree of separation, it sets up a special purpose vehicle and then lends into it — which is why all of these programs are called “emergency lending.” The vehicle then snaps up bonds or makes loans to the private sector.

Article source: https://www.nytimes.com/2020/03/26/business/economy/fed-coronavirus-stimulus.html

Essential? Retailers Like Guitar Center and Michaels Think They Are

The company provides products for small businesses like those on Etsy and has been promoting material that volunteers can make into masks and gowns for health care providers, he said. The health care efforts were outlined Friday in a release, which also advertised temporary sewing stations at stores.

“What we’re doing now is akin to some of the wartime efforts,” Mr. Miquelon said.

More than half of Joann stores are restricted to curbside pickups and shipping from stores. But Mr. Miquelon noted that e-commerce orders could take four to five days and said he did not intend to follow electronics retailers like Best Buy and GameStop in limiting all shopping to curbside pickups.

Joann, based in Hudson, Ohio, was looking at new protections like masks and gloves for its store employees, and protocols for social distancing at cash registers, he said.

“I get employees have anxiety now, but we’re not making anybody work,” Mr. Miquelon said. “We are trying to do everything we can to help customers, help the supply chain, keep people safe and make sure people have a job and food on the table when this thing is over.”

Joann, which employs about 22,000 in its stores, has granted more than 500 leave-of-absence requests, a spokeswoman said on Tuesday. Closed stores are paying typical wages to affected employees for the next two weeks, she said.

A letter from Joann management given to employees to share described the chain’s “Essential Business Activities” as a supplier to home-based businesses and health care professionals. The letters for Sears and Kmart employees says that “essential businesses including hardware stores are permitted to stay open,” and that staff are therefore exempt from emergency closure orders.

Article source: https://www.nytimes.com/2020/03/25/business/coronavirus-essential-retailers.html

How to Prevent a Coronavirus Depression

Helping people who lose their jobs won’t, by itself, prevent long-term economic damage.

With vast numbers of businesses experiencing a collapse in revenue — and in many cases a complete suspension of operations — there is an acute risk of widespread bankruptcies and business closures.

Think of a neighborhood restaurant that is reduced to a handful of takeout and delivery orders while customers are self-isolating. The restaurant can cut back employee hours, reducing payroll cost. But it still owes rent to its landlord; loan payments to its bank; utility costs; property taxes and more.

If the restaurant can get some mix of forbearance from its creditors and favorable loans or grants from the government, it may be poised to open as soon as people can safely eat out again, allowing a rapid return to its normal role in the economy.

If the landlord evicts or the creditors force the company into bankruptcy, it could be months or years before that economic activity returns.

Yes, eventually a new tenant could be found, and the former employees could find new jobs. That’s why bankruptcy works perfectly well in typical business failures. But when all kinds of businesses are failing all at once, it paralyzes the economy.

“Ideally you want all those small and medium-sized businesses that were solvent and doing a great job as of Feb. 1 to still be around and able to do business when folks can get back to work,” said Heather Boushey, president of the Washington Center for Equitable Growth.

It’s true even at bigger scale, with large companies like cruise lines and airlines. In a vacuum, it would do no harm to the economy for them to go through a normal bankruptcy process, with shareholders being wiped out and creditors taking over ownership.

Article source: https://www.nytimes.com/2020/03/25/upshot/preventing-coronavirus-depression.html

Shutdown Spotlights Economic Cost of Saving Lives

It comes down to what a life is worth.

In the 1960s, a Nobel Prize laureate in economics, Thomas C. Schelling, proposed letting people price their own lives. Observing how much they were willing to spend to reduce their odds of death — by buying a bicycle helmet, driving within the speed limit, refusing to buy a house near a toxic-waste site or demanding a higher wage for a more dangerous job — government agencies could compute a price tag.

That can lead to some strange numbers, though. As Peter Singer, the Australian ethical philosopher, noted, you can save a life in poor countries with $2,000 or $3,000, and many of those lives are still allowed to be lost. “If you compare that with $9 million,” he said, “it’s crazy.”

The discussion gets even more touchy when one considers the age profile of the dead. It raises the question: Is saving the life of an 80-year-old as valuable as saving the life of a baby?

Cass Sunstein, a legal scholar who worked for the Obama administration, heading the White House office in charge of these valuations, once proposed focusing government policies on saving years of life rather than lives, as is customary in other countries.

“A program that saves younger people is better, in this sense, than an otherwise identical program that saves older people,” he wrote.

In the George W. Bush administration, the E.P.A. tried to move in Mr. Sunstein’s preferred direction. To calculate the costs and benefits of legislation regulating soot emissions from power plants, it had to figure out the value of reducing premature mortality. Rather than evaluate every life saved at $6.1 million, as it had done in the past, it applied an age discount: People over 70 were worth only 67 percent of the lives of younger people.

The backlash by AARP and others was fierce. And the agency dropped the idea. “E.P.A. will not, I repeat, not use an age-adjusted analysis in decision making,” pleaded Christine Todd Whitman, the E.P.A. administrator at the time. Yet by putting the same price on all lives, the agency implicitly devalued young people’s remaining years.

Article source: https://www.nytimes.com/2020/03/24/business/economy/coronavirus-economy.html

Inside American Airlines’ Scramble as Virus Grounds Jets by Hundreds

“The world is in such a state, we’re in such a state,” said Rick Elieson, the airline’s president overseeing cargo and vice president for international operations. “It’s worth trying and figuring out.”

At American’s Dallas headquarters and at offices around the country, the company has instituted temperature checkpoints for people coming into the office. Those running a fever are not permitted inside.

When customers make reservations, middle seats are being blocked to promote social distancing. Inside airports, kiosks and counters are disinfected regularly. Planes are being fogged with a special solution of chemicals meant to kill the coronavirus. Passengers can now scan their own boarding pass when getting on a plane, rather than handing it back and forth with a gate agent.

Many airport lounges, including those in New York, Chicago, Miami and Dallas, are closed, with more expected to be shuttered in the coming days. In those still open, buffets have been replaced by prepackaged snacks, and there is no more free alcohol.

In first class, there are no more hot towels or hot nuts. Glass Champagne flutes have been replaced with plastic cups. Flight attendants can wear masks and gloves as they walk the aisles. On shorter flights, there is no more beverage service or food for sale.

“Sixty-eight days ago it was about being present and visible in the aisle and having a high number of customer touch points,” said Brady Byrnes, managing director of flight service. “Now we’re faced with social distancing and limiting customer touch points.”

Executives at American had been monitoring the coronavirus since January, when it began to disrupt travel in China and then other parts of Asia. The company’s pilots were among the first to take the outbreak seriously, suing American on Jan. 30 in an effort to stop flights into mainland China and Hong Kong.

Article source: https://www.nytimes.com/2020/03/25/business/coronavirus-american-airlines.html