The rest of the world watched as the United States dramatically reopened “the economy” last month. Now, it seems we’ve changed our minds about that.
The White House has repeatedly said that it will be up to individual states to form their own pandemic response plans moving forward. But letting local governments devise their own solutions has produced large gaps in their preparedness, as well as profound confusion around the best practices for balancing the country’s public and economic health.
California, which represents the largest economy in the US and the fifth largest in the world, was one of the first states to put serious quarantine restrictions in place. The decision to relax those orders only came after anti-lockdown protestors demanded that Governor Gavin Newsom reopen the state’s beaches, businesses and churches. Newsom may now regret this capitulation as California just called for a second round of statewide lockdowns.
Other state legislators are slowly following their lead, as the threat is becoming very dire in some places. Florida, for instance, is now a global hotspot for COVID-19 and Miami is being called “the new Wuhan”. The state is also currently struggling against another wave of unemployment, partly because their economy is heavily dependent on summer tourism (which has persisted despite the spike in cases, but not nearly at pre-pandemic levels).
Florida, California and Texas are altogether responsible for 20 percent of all new COVID-19 cases globally.
Every state is fighting two battles here. Coronavirus relief efforts in the US are still seriously underfunded, and most health organizations here lack the resources to effectively test and treat their communities. But the problems that have emerged for workers and small business owners, like evictions and layoffs, have also been devastating in their own right.
In essence, the United States reopened in an effort to curb the nation’s financial freefall and ballooning unemployment. Economists predicted at the beginning of July that reopening would allow the US to avoid a recession, and all would go smoothly. These projections likely did not account for a spike in cases that would halt this economic rebound.
That’s not to say the circumstances here haven’t improved at all over the past months; currently there is no acute shortage of ventilators, and doctors have had some time to refine their strategies for treating the virus. Overall, the national unemployment rate is slightly declining, while working from home is going so well for companies like Twitter and Facebook that they will be permanently switching much of their staff to remote work.
By comparison, though, New Zealand took the pandemic much more seriously than the US did, and they are objectively in a better position now in all respects. Prime Minister Jacinda Ardern cracked down hard and early, closing the country’s borders completely, and instituting rent freezes nationwide. As a result they have virtually eradicated COVID-19 within their borders. A report from S&P Global also expects New Zealand’s economy to recover quickly compared to the rest of the world.
While this tradeoff seems like a zero sum game – as if we have to pick either our health, or our wealth – it is not. In fact, we could very well end up with neither if our lawmakers don’t proceed with caution.
Dean Ouellette
March 7, 2010 at 8:27 pm
Have to respectfully disagree with you on this one, more government mandates is NOT the way to fix this. Let’s keep the government out of it and come up with an alternative like the HEFI program or some fractional interest program where the bank can save face by cutting principle and make some of it back in the long run while giving the homeowner a payment for a house at market value.
Now of course I know what you are saying, if we are going to spend govt money, let’s be smart about it, but let’s not give them any new ideas, let’s just tell them to step away and let the market correct itself or the banks to become innovative
Fred Glick
March 7, 2010 at 10:07 pm
@Dean My ideas come after discussions with economists, Wharton professors, money mangers and highly respected politicians.
The basis of the economy along with the world wide capital supply does not allow for the currently popular rhetorical method of economic reestablishment.
The government is and must be a driving force to get an economy out of it’s doldrums. This has been true for every recession. Especially, this one that was so severe in combination with the power of a countries like China and Korea that have never threatened the US economy during an American recession.
To give an example, think of this as a line of credit. It goes up, it goes down.
I hope you see the point and if you would like, please email or call to discuss it further.
Nashville Grant
March 10, 2010 at 1:02 am
What if we simply paid demolition companies to demolish all of the foreclosed homes to create scarcity and rising pricing. This method also puts folks back to work in this industry, but uses the opposite approach. Solves over building too 🙂
Ken Montville
March 7, 2010 at 10:14 pm
Are you saying that the Government should buy up all these foreclosed homes from the banks, fix them up ala the New Deal and then sell them?
Certainly the banks aren’t going to sit still for a mandate to spend money. If they would, I’d rather they let some money loose for qualified borrowers or home owners that want to or need to refinance.
Unless, of course, I can be a GS-15 Realtor for the Uncle Sam Real Estate Co. with full Government benefits and leave. 🙂
Justin Boland
March 8, 2010 at 9:40 am
I agree with Dean — the only weak spot in this proposal would appear to be the part where the government is put in charge. There is not a strong tradition of understanding housing among bankers or academic economists. From 60’s tenement projects to the modern mortgage crisis, American homeowners and taxpayers have been the petri dishes for a whole lot of government experiments in the past several decades.
Maybe it’s time to discuss fully privatizing the Federal Government and selling it to Berkshire Hathaway. They could, at least, afford it.
Kristin LaVanway
March 8, 2010 at 11:26 am
Repairing the economy and cleaning up the housing market are really two separate tasks. I agree that the government must be involved in matters of national economy, but real estate is a local issue, and, in my opinion, is not benefitting significantly from government assistance.
Here in Phoenix, one of the nation’s hardest hit housing markets, the market is very brisk, especially in the price ranges below $250K. Fix-and-flip investors pick up distressed properties and turn them into a market-ready product. They are effectively doing what you propose in your article, but with private finds, not tax dollars. Buy-and-hold investors provide rental properties for displaced homeowners who won’t be buying in the near future. And owner-occupants buyers do have a selection of affordable homes.
Reducing the number of foreclosures is the real problem…once these foreclosed homes hit the market, the laws of supply and demand are doing their job.
Aaron Charlton
March 8, 2010 at 3:27 pm
You’re advocating for giving up our freedom to the government in the hopes that they can make better decisions than we can. They tried that 100 years ago in Russia…and 50 years ago in Cuba. Didn’t work so well for them.
Benn Rosales
March 8, 2010 at 3:39 pm
Because it’s the gov handling the improvements the best we could hope for is ADA compliance and that it meets code. Why not just turn the 8k credit into a home improvement credit, didn’t hud do this in the 80s to move inventory? Zero down to 100 down with improvement incentives?
Aaron Charlton
March 8, 2010 at 3:46 pm
To be honest, these are good ideas. I just personally don’t trust the government with money. It scares the heck out of me! If they can’t figure it out with the money they’ve already printed, more programs and more money can only make it worse. I’d like to see them take a step back.
Greg Barnhouse
March 8, 2010 at 10:56 pm
Really? I’d say keep the government far, far away from foreclosures and short sales. The government has proven they cannot be trusted with our money. Even the banks gave the “bail-out” money back. I’m all for less govenment.
I’d say, let it run its course. It will get sorted out.
Fred Glick
March 10, 2010 at 8:47 am
@Grant,
I actually called for that awhile ago on CNBC for new construction.
It is a logical add-on to my idea.
Someone has to do a market survey on each house to see which ones would get the rehab. We are not going to rehab houses so they will sit.
Also, I would like to see Fannie and Freddie expand the financing that they are offering for their REOs where you can get 97% with no MI for owners and 90% for investors.
All they are doing is transferring the paper to people that have great credit and income. But, they are blanking out others of similar situations from homeownership and recovery by making them go through mortgage hell.
If we can replace a Fannie Mae no-doc with 500 credit with a 95%, 750 credit score full doc but with 3% down and no-MI, aren’t we all in better shape?
Fred Glick
March 11, 2010 at 7:14 am
Here we go, the CNBC interview:
https://www.youtube.com/watch?v=o3mc8_e2v9I