Categories
Corporate Finance COVID-19 Economics Finance Statistics

The Fed is the Problem, Not the Solution

Photo by Jp Valery on Unsplash

Uncertainty is the cause of most downturns in the market, the COVID Correction is no different. Disregard the markets and think about how you felt when the government issued a stay at home order. Seeing the major roads in Denver completely empty felt post-apocalyptic to put it mildly. Full disclosure, I was scared. Uncertainty rippled through the population and resulted in panic that crashed the markets causing the steepest (fastest) decline in the stock market in the history of the stock market.

The Fed has a hammer which is useful for nails but not for screws. Unemployment resulting from COVID-19 lockdowns are a screw problem but Jerome Powell keeps hammering away. The solution is to reopen the economy, not print money. A strong economy earns money through their own ability and trades it back to other businesses for goods and services. Jerome Powell has implemented a “trust fund baby economy” creating dependency on the government rather than our own ability to earn. People and businesses are holding more cash due to government stimulus. The all-powerful, all-knowing Federal Government is shamelessly taking a page out of the Great Recession hand book and fixing the issue with printed money. Printed money was the prescription then because the cause was insufficient demand for goods coupled with a complete collapse of the financial and banking systems. The problem now is unemployment CAUSED BY government shutdowns. The solution is reopening businesses and giving people and business owners back their personal liberties to earn and spend money.

As states like Florida, Mississippi, Louisiana and Michigan begin lifting lockdowns we will start to see recovery driven more by real earning and real consumer spending. That is the “screwdriver” we need to recover.

As this unbridled stimulus continues I worry not only for myself but for my children and grandchildren. The printed money has to be repaid through debt service and diluting the value of the US dollar. What really worries me is how easily our society is willing to let the government infringe on our personal liberties. I liken it to a mass Stockholm Syndrome where society is lauding our oppressors, the US and state governments. They have given us “life” at the expense of “liberty and the pursuit of happiness” and this should not be applauded.

The government thinks we are stupid but I have faith in my fellow Americans. If you are in a risky group make the choice to stay home or limit your public interactions until you receive a vaccination. If you are a part of the high risk population but suffering from depression because of isolation make the call of what is more important to you, a POTENTIAL exposure or your personal happiness. Young healthy people should be permitted to live their lives, run businesses, work and play.

Christopher Barker, CFP®, AIF®, MBA

Categories
COVID-19

Opinion: Shuttered Local Businesses. A Shout Out to The Dreamers.

It is devastating driving around my community and seeing all of the businesses and dreams that have died because of the government mandated shutdowns. While it is devastating to me, I am not the one who has to wake up to a personal dream being destroyed because someone elected official decided that my business should be shut down.

I am a proponent of the smallest government possible. In the words of Steve Austin from 30 Rock “if we have to have government, make it as small as possible. Dwarves. Tiny buildings. Pizza bagels for lunch.” Kidding of course…

I do think we should have public parks and roads and perhaps this is unpopular, I appreciate and respect the police. The government should have a very limited scope, enforce law and order and encourage business growth.

In the last year we have seen mayors and governors shut down entire local economies with no rhyme or reason utterly destroying the American Dream for tens if not hundreds of thousands of Americans. The net effect is to pull the flow of consumer spending from small businesses and the families they support and push them into the fat bank accounts of US Mega Cap companies.

Local restaurants are the lifeblood and culture of any community. As an adult I have lived in Minneapolis, Duluth, San Jose, and now Denver and every time I leave a city I first miss the people,second I miss the local restaurants.

Here is a shout out and a heartfelt thanks to the Denver Dreamers who risked their livelihood and have had to permanently shutter their businesses because of government shutdowns. Thank you for sharing your passion and love for food with your community.

List of My Favorite Restaurants Permanently Shuttered During COVID Shutdowns – And quick memory if applicable.

Buchi Cafe – The best Cuban sandwich I have ever had. Wonderful Cuban coffee.

Cap Hill Tavern

Common Grounds Coffee House – A great local coffee shop

Denver Diner – Sharing a big plate of waffles with my daughter before bringing her to daycare when she was having “big feelings” in the morning

Dunbar Kitchen

Euclid Hall

Landry’s Seafood

Local 46 – Meeting up with friends in the neighborhood to catch up and let the kids play on the back porch.

Meadowlark – The first bar I went to in Denver after driving a moving truck across the country.

The Palm – A late lunch and a martini with a good friend after a long time away.

Revelry

Scratch Burrito – Winning $100 on the “shake-a-day”!

Vesta Dipping Grill – Grabbing a wonderful dinner with my dad who was passing through town for a couple of hours. Such good tapas!

Categories
Corporate Finance COVID-19 Economics Finance Statistics

Republicans, Democrats and the Stock Market. It Doesn’t Matter!

Photo by Clay Banks on Unsplash

People from retail investors to some of the most sophisticated economists keep repeating that stocks are overpriced and the bull market is coming to an end. Many people believe that the tax policy of the incoming Democratic administration is going to have a detrimental effect on an already fragile economy. It doesn’t matter what color tie you are wearing, the stock market is doing just fine, for now!

Republicans vs. Democrats and the Stock Market

Many believe that Biden’s tough stance on tax policy will be detrimental to corporate profits which in turn will result in slower growth. While it is true that the stock market generally performs better with lower corporate taxes and less regulation, a fundamentally republican philosophy, Bill Clinton’s tenure saw a 225% increase in stock values which was roughly double the pace Donald Trump saw in his administration. Giving all the credit to Clinton is unfair. His objectives were stymied by a Republican House and Senate for most of his presidency resulting in veto after veto of his policies increasing regulation and otherwise.

Even Reagan the King of the Republicans saw a roughly 150% growth in stocks during his presidency. Coincidently this is a very similar growth Barack Obama saw during his term. The truth is, it doesn’t really matter.

Biden would love nothing more than to repeal the Trump corporate tax cuts. With record high unemployment and businesses shut down by draconian COVID-19 prevention measures, we are unlikely to see any tax hikes until 2022. The stock market “knows” this which is why we have seen expansion deep into Biden’s first 100 days.

One consideration is the next stimulus package which should be hitting the president’s desk very soon. M2 or the measure of money supply in checking deposits, cash on hand is 25% higher than it was a year ago which is great for the stock market. The more money people and businesses have in their checking accounts, the more confidence they have in the stock market. On the flip side, a lot of this money came from previous stimulus packages giving cash payments to people both employed and unemployed while expanding unemployment benefits. This money was printed by the fed so the money supply is artificially high and only going to get higher.

For now however, people feel more wealthy with the increase in M2 money supply and businesses feel unconstrained. This is a perfect argument for continued expansion leading many economists to believe that we should see stock market growth through the end of 2021.

Check out the back link to a cool resource on market performance by president.

Stock Market Performance by President

The Numbers

Real GDP growth for the last quarter of 2020 is estimated at 4.0% which will likely be revised up once all the numbers are in. Manufacturing and industrial production are up and has been up for 9 months in a row. Another startling fact is that retail sales in January 2021 were up 7.4% from a year prior. Let that settle in. With all the COVID shutdowns, riots in every major city, job losses and unemployment at unprecedented levels and the most contentious election in many of our lifetimes, RETAIL SALES ARE UP 7.4% FROM PRE-COVID LEVELS!

The only scary part is the economy is being propped up almost entirely on credit. Meaning that the stimulus dollars printed by the US government are creating artificial demand which many believe could drive inflation much higher in the future.

Printing money and giving it to consumers will make people feel richer and thus boost demand. Consumer’s are then willing to pay more for goods (up about 1.4% from a year ago). As we see businesses begin to reopen and further stimulus continuing to make people feel richer, we should see further growth from both the supply and demand sides. Once the government wakes up from its stimulus hang over and realizes that it needs to pay its tab, things could get nasty.

Christopher Barker, CFP®, AIF®, MBA

Categories
Corporate Finance Economics Finance Media Statistics

The Reality of the Student Debt Problem

One of the more contentious hot button issues during the last election was student debt forgiveness.  The left calling for a clean slate on all debt which got a lot of younger voters really feeling the Bern!  I wanted to briefly explore this issue and how it relates to inflation and compounding. We will leave the “how do we pay for it” conversation for another post.

Inflation is simply stated that the cost of a basket of goods increases over time.  If say gallon of milk costs you $3.00 today and next year that same gallon of milk costs $3.06 most people are going to be able to stomach that increase and likely won’t even notice it.  That is a 2% cost increase. On the other hand if a gallon of milk goes from $3 to $9 that would cause a problem That is a 300% increase in the cost and could price some lower income families out of the milk market.  

The average inflation rate in the US over the last 28 years is roughly 2.46% which is pretty reasonable and close to the 2% Federal Reserve target.  College tuition costs rise at roughly 8% per year.  This isn’t a hyper inflation situation but thinking about using the rule of 72 puts it into perspective.  The rule of 72 states that if you divide a percentage by 72, the result is the number of years it takes for a dollar to double.  With regular inflation that gallon of milk would double in price in about 30 years.  Education is doubling in cost every 9 years. 

If you graduate today from University of Colorado Boulder, your senior year out of state tuition would be $37,578 for two semesters.  In 20 years at 8% this would cost $179,149!  A 4 year college degree with a freshman starting school in 2041 would cost almost $800,000!  For some perspective in that same period of time a $3 gallon of milk would increase to just $4.88. 

One of the causes of inflation is the cost of production.  Universities are a business and in order to attract customers (teenage ‘children’ with an unlimited supply of money) they have engaged in an arms race.  The dining center at my undergraduate institution had 2 daily options for a meal. My graduate degree had over 20 stations with cuisine from around the world! When a 16 or 17 year old is picking out a school they are obviously going to choose the one with the state of the art fitness center over the one with the outdated gym.  None of these “improvements” are free, none of them improve the quality of professors,  and the cost is added to the tuition. 

When politicians frame this issue as “the student debt problem” they are pointing to the result of this arms race. The problem is actually a “higher education cost problem” and putting the decision to take on massive amounts of debt on the shoulders of children who have likely never made more than $12/hour. This wouldn’t be a problem if a 4 year degree cost $30k like mine did 20 years ago.  Even majoring in something professionally unmarketable you can chip away at it.  

Now that we have unpacked the problem I offer a solution. If the availability of lender capital to students was dependent on the students ability to repay, it would change the whole business model.  Banks would evaluate Universities not on their Princeton Review Party School Rank but instead on their graduation rate and post graduate average salary. This would incentivize universities to prioritize education over fitness centers and dining halls.

The problem does not lie in the debt. Debt is the result of the problem.  Educational institutions have their priorities focused on attracting as many teenagers with unlimited money supply rather than on educating.  Fixing the result without fixing the problem doesn’t work. 

Christopher Barker, CFP®, AIF®, MBA

Sources

Inflationdata.com

Investopedia.com

Research.collegeboard.org

Finaid.org

Colorado.edu

princetonreview.com

Categories
Finance Personal Finance

Getting Organized is the Biggest Roadblock to Effective Financial Planning

I personally meet with dozens of people every year who have an interest in financial planning for one reason or another. Most of the time, potential clients don’t even know what they are looking for they just have some internal driver that they are missing out on an important aspect of adulting.

My planning clients obviously have a very diverse range of financial sophistication ranging from not knowing if they have or are contributing to their 401k to presenting financial plans to ME that rival the output of expensive planning software. Another way of saying the same thing is that some clients are organized and others are not.

The majority of people I talk to are at least a little disorganized and they feel ashamed or irresponsible to some degree. I don’t believe that this observation is anecdotal rather, it is fundamental to the human condition! I am really good with financial concepts and economics because I worked really hard to get there. Others are good at medicine, floral arrangements or running because they worked at it. Very few people unless intrinsically motivated are well organized financially. Almost everyone needs to get organized but they don’t know where to start.

If you have millions of dollars most financial advisors would love to spend the time to help you get organized. This is a chicken and egg problem because if you have millions of dollars you probably have done something to get and stay on track. In my practice I am going to be implementing a cost effective fee based approach to walk clients through a process to get organized regardless if they have $500 or $5m. If you don’t have millions of dollars or want to do it on your own, here is a quick checklist you can follow to get your hands around your financial life. Next, it takes ongoing effort to update this periodically. Much less effort than getting started but very important. This way you can track your progress towards growing wealth, paying down debt or whatever your current financial priorities are.

  1. Brainstorming Stage – Make a list by brainstorming where your money is. NO NOT LOOK ANYTHING UP AT THIS POINT. Keep it simple and we will get to the details later.
    1. Checking and savings account with rough balances
    2. Investment accounts that aren’t retirement accounts if applicable. Rough balance if you know it.
    3. Retirement accounts. Current employer 401k type plans and what you think the balance is.
    4. Home Value if you own one and roughly what is remaining on your mortgage if you have some idea. The year you bought the house if you remember and how long your mortgage term is if you know.
    5. Any debt like credit cards and lines of credit. List out the credit cards and a rough balance owed. If you have a credit card that you pay down to $0 at the end of every month, just put $0 on it. This is called “rolling debt”and shouldnt be counted against you.
    6. Car Loan balance if you know it or just write down that you have one and we will fill that in later.
    7. Any other wacky stuff like annuities or life insurance with cash value.
    8. If you have had a number of jobs write those down on this list. You might have some old retirement plan dollars there even if its just a few hundred dollars.
    9. Remember, this is brainstorming so leave some room between categories and at the bottom of the page to fill in things you might have forgot.
  2. Data Organization Stage – In this step you are going to organize your information into a spreadsheet. Enter the account type, institutions, owners and values if you know them. See below for example.
  3. Data Validation Stage – This is the hardest part! Getting all of your log-ins and figuring out where everything is. I recommend getting some kind of secure password keeping application before entering this step. That way, once you go through the work to look up the passwords you have them saved somewhere securely. I use LastPass because it is cheap and it works across different devices.
    1. Because you have entered the institution in the spreadsheet above you know where the money is now! Just go down the list and log in to those websites and fill in the values.
    2. Getting in touch with your HR might be necessary to access your work retirement plan.
  4. Track your Progress! – You can set a reminder on your calendar to check in on your net worth once a month. After this is done, it will only take a minute to log back in and update your information.
Sample Asset Worksheet
Sample Liability Worksheet

This might sound really simple and elementary but as a practicing Certified Financial Planner it is where I start with every single client. If you want help from me or a member of my team to walk you through a more in depth Getting Organized session feel free to direct message me on LinkedIn https://www.linkedin.com/in/chbarker/

Happy Planning!

Chris Barker CFP, AIF, MBA

Categories
Finance Personal Finance

The Market Will Not Make You Rich

As a financial advisor I work with all kinds of clients, the best ones are not the ones that make the most money, they are the ones with the greatest propensity to save money. The market does not make people rich (as much as it pains me to say it), one’s ability to live within and below their means does.

I wanted to illustrate an example of how this plays out. The average growth of U.S. Large Cap (think S&P500 for simplicity) equities have grown on average 10% from 1926-2016 with some up years and some big down years including the great recession. Lets say you had 10k to invest and in every year for 10 years you got a return doubling that average return with no down years, here is how it would play out…

10 years with 20% return every year starting with a $10,000 initial investment

After 10 years your money would grow to almost $62k. That isn’t bad but it is unrealistic. I illustrate this because many investors I talk to have unrealistic expectations of market performance. Many investors suffer from selection bias by thinking back to years when the market was up 20-30% and believe that achieving the low end of that range is achievable on average. In reality the range for the S&P 500 is more like NEGATIVE 6% to POSITIVE 29%. From 2010-2020 the S&P 500 averaged just shy of 12% so here is how the same scenario would have played out in real life.

Actual S&P 500 returns and the resulting growth on a $10k initial investment.

In the real world, that client would have gotten almost $30k which isn’t that earth shattering for tying your money up for 10 years.

Now let’s take another scenario, you have no money saved but you would like some in the future. It doesn’t take much besides discipline to build a nice nest egg. The below example is someone starting at zero and putting away $200/month growing at 10% or about 2% lower than the actual S&P 500 average returns.

Systematic Savings of $200/month growing at 10% per year.

For any numbers people out there the actual growth would be higher because the simple example does not take into account that there would be 11 months of growth on the first $200 deposit (and so on). Keep in mind that the average return is 2% lower than it is in the first example as well. I concede that the systematic saving example has a much greater outlay ($24,000) than the first example of $10k but in my experience, it is far easier for my clients to come up with $200 every month than $10,000 once. More often than not my clients will increase their contributions over time as they get used to the new lifestyle that results from saving.

Systematic Saving and Varying Returns

One of the common fears of investing is if now is the best time to invest. This fear can be mitigated to some degree by systematic investing because you aren’t putting all of your money in at the same time. Unpacking the true fear people have is that they don’t want to invest at the top of the market. In the following example lets say the market drops 20% in the first 2 years and goes up 15% for the next 8 years. The first example $10k is invested right away and the second example $1000/year is invested every year for 10 years.

Lump Sum vs. Systematic Investing illustrating Sequence of Returns Risk.

The same $10k is invested but the result is about $600 more by investing systematically. Both scenarios have an average return of 8% but the systematic investor went on a much smoother ride. From the bottom on the first example it took the investor until somewhere in 2014 to get back to even when the systematic investor had put $4000 in and had over $4000 in the account somewhere in 2013. Add some zeros to either case and you can start to feel the pain of a down year. With a $100k investment in the first scenario that investor would only have had $64k in the account at the end of the second year. That is a $36k loss in two years. In the second example they had $20k invested and the balance is down to $14,400 or a $5,600 loss.

Rather than scaring you not to invest a large sum this dramatic example is intended to encourage you to start something on a monthly basis even if its small. In either example the client has doubled their total deposits which is still better than nothing.

If you want to start saving today, feel free to click the link below to open an account. Feel free to reach out if you have any questions or leave a comment and I will get back to you personally.

Christopher Barker, CFP®, AIF®, MBA

CLICK HERE TO START SAVING TODAY!

Categories
COVID-19 Statistics

Update on the Real Risk of Dying with COVID-19

COVID-19 and either its devastation or a friend that tested positive with minimal or no symptoms is on the top of everybody’s minds. It is everywhere we look and injected in almost every conversation we have these days. It has saturated the media and personal conversations to the point that any conversation without a mention of immunology is a breath of fresh air. This is an update on a post I made months ago on The Risk of NOT Dying from COVID-19.

We have been told that the highest risk of dying from COVID-19 is in the elderly and at risk populations. In my civilian research it is hard to come across and interpret comorbidity as it relates to COVID-19 so lets just tackle what we can, age and death rates of people who died “WITH” not “OF” COVID-19.

Those over the age of 65 represent 16.5% of the population and represent almost 80% of the COVID-19 related deaths. That leaves 83.5% of the US popluation representing about 20% of the deaths of people who died with COVID-19 positive tests.

Furthermore, those 44 and under represent 58.2% of the population, well over half, and represent 2.6% of the deaths. This represents a large chunk of the labor force who are currently out of work, working from home or have had some level of financial impact from someone in their household who lost work or has to work less because of a need to care for children because of school shut downs.

The average retirement age in the US according to Dave Ramsey’s website is 65 years old. The percentage of COVID-19 related deaths of those age 64 and under is 20.3% of the total. This age group represents the vast majority of workers and one fifth of the deaths. Those above the average retirement age represent 16.5% of the population and 79.7% of all deaths in the US who died with COVID-19. While each and every one of these people have loved ones and each death is tragic, are draconian shutdowns doing more harm than good?

Unpacking that a bit, is there a better solution for government spending policies and shutdowns that could be more productive for public health and economic stability (and mental health). Instead of shutting down small businesses and paying their workers unemployment benefits, keep the businesses open and redirect a fraction of those funds to those 65 and older who choose to stay at home VOLUNTARILY. The real cost that shutdowns are having on our economy is catastrophic.

Many people don’t see the financial carnage wrought because they look at the financial news. As a financial advisor myself it is easy to get drawn into this falsehood. The S&P500 and Dow Jones Industrial Average are up. Here is the financial lesson for the day, the S&P500 and DJIA are comprised of large cap U.S. stocks like Apple, Coca-Cola and Home Depot. Those companies are going to ride out the storm. People are going to buy laptops, drink soda and fix up their homes in good times and bad. The real losers are the small businesses. Smaller even than the Russell 2000 companies which is comprised of small U.S. based companies. Bucci Sandwiches, Ernest Hall and Nick’s Diner are companies many of you haven’t heard of but they are near and dear to me and they are all victims of the shutdown and draconian quarantine mandate. Between them they employed about 50 employees and all of them have business owners that are financially destroyed. One business owner which I won’t name decided not to follow the local shutdown mandate telling me “either I am going to go out of business because I obey the order or I go out of business because I stay open and get fined, I am not going to go down without a fight”. This business is still thriving today.

All of that said, wear a mask, wash your hands and get some exercise. Take care of your health pandemic or no pandemic. Get vaccinated when it is safe to do so. Question the spoon feeding of the media. Look at the real numbers and let your voice be heard.

Categories
COVID-19 Economics Media Statistics

The Media is Sensationalizing COVID-19

Photo by Nijwam Swargiary on Unsplash

Talking with friends that watch a lot of news and those that don’t have substantially different thoughts on the dangers surrounding the COVID-19 virus.  This is anecdotal but I thought this hunch was worth exploring.  

The Washington Examiner reported earlier this month that 91% of major U.S. media outlets had a negative tone when reporting on COVID-19. This is in contrast with scientific journals who had a negative tone 65% of the time.  Another way of thinking about it is that the media reports negative COVID-19 news 40% more than the scientific community. 

This begs the question, why are major U.S. media sources so negative in relation to scientists?  Let’s follow the money, shall we? 

Year-over-year between Q2 of 2019 and Q2 of 2020 network TV nightly news has seen an 11% increase in ad revenue.  Fox News has seen a 41% increase in ad revenue in that same period. The nightly news broadcasts on ABC, NBC and CBS from March 16th to April 22nd of 2020 are up 29% over the same 5 weeks in 2019. Major U.S. news sources are seeing a resurgence in revenue and one can assume that they have no incentive to change their narrative if the money keeps rolling in.  Fear sells and we are buying it from an industry that has been losing market share to social media and smaller media outlets.  

Scientists on the other hand do not have a clear monetary incentive to perpetuate fear.  When coupled with peer-review, the scientific community has a greater incentive to report the truth.  A great example in the Washington Examiner and The Atlantic cite a study where infection rates among students in schools are very low. The study states that schools are not the “super-spreaders” that were previously thought.  Even when major U.S. media sources had this information at their fingertips, 90% of their articles represented a negative picture to school reopening rather than the positive report from the study or other researchers. They instead focused on the less documented potential threat of spreading the disease to at risk populations outside of the school walls. 

Major media wants you to tune in, that is their business model.  The CDC recommends that we should do all we can to reduce COVID-19 related media from major sources as well as social media.  If the media were more in line with the scientific community perhaps the CDC wouldn’t make that recommendation.  The CDC also warns us about separating fact from fiction.  The scientific community has roughly 1 glimmer of hope for every 3 negative reports.  When you put it that way, it sounds somewhat optimistic.  The U.S. news media reports 1 positive story for every 9 negative stories.  The media are trumpeting a doomsday scenario which is out of line with the scientific community. 

When COVID-19 is behind us and we see that we were misled, it is my hope that the American people revolt against the major media sources so we cannot be misled again.  Stay vigilant and don’t believe everything you hear on the news.  

Christopher Barker

Source List

https://www.washingtonexaminer.com/news/us-media-coverage-of-coronavirus-skews-overwhelmingly-negative-compared-to-international-sources-study

https://www.journalism.org/2020/10/29/coronavirus-driven-downturn-hits-newspapers-hard-as-tv-news-thrives/

https://www.hollywoodreporter.com/live-feed/network-newscasts-keep-up-ratings-momentum-pandemic-1291263

https://www.pewresearch.org/fact-tank/2019/08/01/large-u-s-newspapers-layoffs-2018/
https://www.pewresearch.org/fact-tank/2020/07/14/key-facts-about-digital-native-news-outlets-amid-staff-cuts-revenue-losses/

https://www.theatlantic.com/ideas/archive/2020/10/schools-arent-superspreaders/616669/

https://www.cdc.gov/coronavirus/2019-ncov/daily-life-coping/managing-stress-anxiety.html

Categories
COVID-19 Economics

COVID-19 Common Sense Ideas. Lockdown is Not the Answer

It has been over 200 days since COVID-19 has become a big concern. In that time I have found individual beliefs about the shutdown to be as divisive as politics or religion. I have written a couple of articles on COVID-19 from the economic perspective and because of the divisive nature of this topic as always, I try to stick just to the facts. Any death of a loved one is tragic and my intention is not to downplay the real suffering from this horrible virus. Rather, I would like to outline a couple of facts and the impact that shutdowns are having on the economy and brainstorm some ideas of how we could do it better.

Who are we Protecting? Who are we Hurting?

Problem: Strictly from an economic standpoint we are shutting down most of the economy to protect a small fraction of those most at risk. Eighty four percent of the population is under the age of 64. That same group accounts for 21.2% of the deaths attributed (at least in part) to COVID-19 related complications according to the CDC and NCHS. According to the BLS 94.2% of the workforce is between the age of 16 and 64. Put another way, we have shut down much of the economy to protect the at risk group which comprises 5.8% of the labor force.

Solution: Remember when we were trying to flatten the curve? In many states we have! This includes states like California that are still in aggressive lockdowns. In states with flattening curves retirees can self quarantine if they choose and still keep the economy open to a much larger degree. The money spent on unemployment benefits for those willing and able to work could be redirected to those in the most at-risk group. It could pay to support the elderly to get essentials delivered or other community related services to support those most in danger.

State Mandate, National Impact

Problem: When you look state by state the numbers are alarming. Deaths in New York are down 99% from their peak. This is likely due to the draconian pandemic restrictions and quarantines. While this is an argument for shutdowns New York has an unemployment rate of 12.5% when the national average excluding New York and California is only 7.7% (CA unemployment rate is 11.4%). Both those states comprise 18% of the US population and 32% of all United States citizens currently receiving unemployment benefits.

While the states individual states are mostly responsible to pay unemployment benefits they can lean on the federal treasury to satisfy claims that the states are unable to pay (Brookings Institution). With two states paying out 1/3rd of the total benefits the effect could be that taxes on employers in EVERY STATE could increase through federal mandate if New York and California are unable to repay the treasury.

According to 91-divoc.com, yesterday California and New York comprised 7.38% and 3% respectively of the total COVID-19 cases in the US. A total of 10.38% of all cases in in two states and they are paying out 32% of the United States’ unemployment benefits.

Solution: The Treasury needs to require that states repay their unemployment from the state general fund. As it stands now a state that can’t pay back their unemployment loans from the Treasury must increase the tax on employers. Those same businesses that were forced to shut down will then be forced to pay higher Federal unemployment tax until the debt is resolved. If the state governor mandates a shutdown, the businesses who are hurt most shouldn’t be on the hook. There is no winning in this scenario, there won’t be enough businesses left to pay!

Christopher Barker

Categories
COVID-19 Economics Statistics

COVID-19 Facts YOU MUST KNOW!

Photo by engin akyurt on Unsplash

This is going to be a short article. I referenced a report from the CDC and a data sheet from First Trust Portfolio’s economics staff. Both links are posted at the bottom of the article to review and I suggest you check them out. The facts are in. Depressive disorders and anxiety have increased at an alarming rate since Q2 of 2019 v. 2020. Substance abuse deaths are on pace to reach record highs year over year. All of which coincide with municipal economic shutdowns related to COVID-19 fears.

I have said since the beginning of COVID-19 related shutdowns, we are going to save lives of people dying with the virus by shutting people in their homes. In the same breath, we are going to suffer rippling effects of shutdowns that are going to be far greater.

The CDC ran a survey at the end of June. Between Q2 in 2019 and 2020 the prevalence of symptoms of anxiety disorders is up from 8.1% to 25.5%. That is THREE TIMES higher than a year ago! The prevalence of depressive disorders is even more alarming. In that same period the rate has gone from 6.5% to 24.3% or almost FOUR TIMES higher than a year ago! There are people having to deal with the unexpected and tragic loss loss of a loved one but with the roughly 200 thousand deaths and a population of over 325 million people that is only 0.06% of the population affected. For argument sake, let’s say each death touches 100 lives so directly that one would exhibit depressive symptoms. That is 6% of the population. Depressive disorders are up 17.8% from the same time a year ago! Something else must be accounting for the increase.

I said I would be brief so I am going to move on to my final point. San Fransisco has suffered some of the most draconian shutdowns this nation has seen. As a frequent visitor I can tell you the town is nothing without its bars and restaurants. Another anecdotal aside I personally know a handful of people that have fled the city to find less oppressive governments. Overdose deaths in San Fransisco are on pace to hit 675 deaths this year. That is an increase of 234 deaths from overdose in 2019. That number is almost double the 123 COVID-19 related deaths the city has seen.

Continued shutdowns are going to cause rippling effects that will not be able to be undone. I gave you a few examples and in the coming years we are going to hear from real writers that will write volumes on the topic. We have to seriously consider the alternatives and actively petition our state and local governments to act with more common sense.

Chris Barker

Link to First Trust COVID Tracker

Link to CDC Study