Last Friday, U.S. Senator Bob Menendez, Democrat of New jersey, introduced S. 3550, the Municipal Bonds Emergency Act. The bill aims to amend the Federal Reserve Act to permit the Board of Governors of the Federal Reserve System to engage in certain open market operations during unusual and exigent circumstances. The Federal Reserve’s authority would be extended to purchase bonds with any maturity period versus the current six month maturity period under Section 14 of the Federal Reserve Act.
Mr. Menendez’s rationale for the bill is to provide cities with another avenue of financing the rising costs of addressing the COVID-19. Mr Menendez’s argument for the bill may get an additional boost given that the U.S. Senate failed to advance a bill that is apparently blocking negotiations for a corona virus response bill that would provide between $1 trillion to $2 trillion in support, including financial aid for individuals, small businesses, and affected airlines, according to reporting by Reuters.
The bill holding up the process, HR 748, is a designed to repeal an excise tax on high-cost employer-sponsored insurance coverage. It appears that Republicans want to get the bill, which was introduced back in July 2019, out of the way before proceeding to a, now estimated, $2 trillion stimulus package that contains financial support for banks, hospitals, other health care providers, and individuals.
Bill Ackman appeared on CNBC two nights ago where he recommend that the United States go on a 30-day lock down in order to combat the Corona virus. Mr Ackman is chief executive officer of Pershing Square Capital, an investment firm with billions of dollars under management.
CNBC is a business channel, but Mr Ackman was able to share that the source for his policy recommendation stemmed from an emotional place, in this case how Mr Ackman is dealing with the poor health of his father. Mr Ackman argues that the primary tactic for dealing with the virus is to kill it and that killing it means that everyone go into quarantine and spend time with loved ones for 30 days. Hopefully this period away from work and other social contact would deprive the virus of its ability to spread with the warmer months eradicating the remnants of this virulent and deadly strain.
Mr Ackman’s argument doesn’t sound implausible given what we know about how the virus spreads. Going around looking like bandits while giving each other elbow taps may aid in reducing the virus’ spread, but in the end, sick people staying away from well people may be the better of the tactics.
But just as CNBC is a business channel, this blog is a political channel so we come to the question of politics. What would be the political impact on Georgia from shutting down a chunk of the American economy for 30-days in order to fight and kill a virus? Would there be any increase in political power and capital for elected federal, state, and local officials from such a move?
As with any policy, it depends on how you manage the cons.
What is at risk economically in Georgia due to COVID-19?
Here are a couple examples of industries at risk in Georgia due to COVID-19. The film industry has a growing influence on Georgia’s economy. It is estimated that the industry spent $2.9 billion toward hotel, travel, film crews, catering, props, and equipment. According to the Georgia Department of Economic Development, Georgia exported $10.8 billion of aerospace product and services. In addition, the aerospace industry has a $57.5 billion overall impact on Georgia’s economy.
As a young management analyst with the Georgia Department of Audits in the 1980s, I saw first hand how important Georgia’s agricultural industry is to the state when I conducted an analysis of the state’s poultry labs. Today, agriculture is still the state’s leading industry with an estimated annual impact of $75 billion. In addition, poultry farmers raise 1.3 billion chickens a year and put 9.3 million acres of farmland into production.
Approximately 270,000 workers are employed in Georgia’s advanced manufacturing industry, an industry producing $61.1 billion in output for Georgia.
Conclusion: So far, I see no backlash to the State’s “no shutdown” decision
Since 28 February 2020, Georgia governor Brian Kemp has issued six executive orders addressing the COVID-19 outbreak. None, at the time of this writing, have ordered a shutdown of the state’s businesses. Georgia’s active workforce dwarfs the 555 confirmed cases and 20 deaths in the state so far. Given no shutdown has been ordered by the state, it has been left up to local governments to issue rules on business closures. Reportedly, Governor Brian Kemp is heeding advice from experts to avoid a shutdown at this time.
Admittedly it is too early to tell the extent of any current damage to these industries. If Georgia businesses go from voluntary compliance with recommendations of social distancing to a statewide shutdown of businesses, it is at that time that we should see some concrete impact on the state’s economy. At that point, the question will be, for how long and after that period, the next question will be how much of Georgia’s economy do we have left?
