Business & Economics

The Next Shoes to Drop in the Pandemic

We face a burgeoning health and economic crisis, but not all the news is bad

Photo by Richard Bord/Getty Images

In the span of a few months, we have witnessed as many world historical news events as might normally occur over a decade or more. Expect this trend to continue. Because the COVID-19 pandemic spreads on an exponential scale, our long, false lull of normalcy appears to have been suddenly pierced by a series of rapid, fearful escalations. But not all the news is bad and more good news could be coming, especially if promising treatments pan out. Here are a few burgeoning trends that should soon take center stage in the policy arena barring significant, unexpected interventions.

The situation in New York City gets worse

New York City faces a genuine health crisis within days. Other big cities may follow soon. That means it is essential to get masks and other protective gear immediately to hospitals, first responders, and others there who have unavoidable contact with the public.

The crisis is looming because New York is currently nearing capacity in its hospitals, and those current patients contracted the virus a week or so ago. It takes that long for the virus to take hold and present serious symptoms. These newer cases will begin suffering their worst symptoms over the next week or two.

In the meantime, the number of likely infections in New York has expanded exponentially. There is simply no place to put these new people, no protective gear for those who will treat them, no respirators or ventilators for all who will need them. Without those essential tools and without successful new treatments, the death toll will be appalling.

There will be time later for finger pointing about why these shortages happened. Everybody has their favorite culprit, and more than one of them might be to blame. Right now, though, it’s far more important to look forward and try to manage the problem.

It’s worth remembering that there is no off-the-shelf plan for emergencies of this scale. It struck with ferocity and extraordinary rapidity. We lost crucial time while China hid the facts, the Centers for Disease Control sent out bad test kits, and the Trump administration downplayed the gravity of the pandemic. Those failures are worth debating—but not now. In any case, they all seem to be behind us now.

The issue today is whether individuals are doing all they can to prevent themselves and their neighbors from the contagion and whether federal, state and local governments are planning and acting efficiently to cope with the crisis going forward. The good news is that all these government agencies are now focused on the pertinent health and economic issues, all are trying to cut through red tape and provide emergency funding, all are working with private industries and health-care providers, and all are looking forward.

Moreover, these agencies and private businesses seem to be coordinating extremely well. Just as important, the right questions are being asked: How do we speed up the production of essential equipment and medicine? How do we get those supplies quickly to hot spots? How do we deal with the most vulnerable populations? How do we help people who are out of work and who need to pay for food, rent, and more?

The one piece of immediate good news is that medical supplies won’t be delayed for financial reasons. Neither, it seems, will patients be denied treatment for financial reasons. The federal government has moved very quickly to pass bills that will pay for equipment, treatment, research, and testing. The pressing questions are how fast can manufacturing and distribution be ramped up, how fast can hospital capacity be expanded, and how fast can new treatments be devised?

Experimental treatments can buy us precious time while we search for safe vaccines

Unfortunately, vaccines won’t be available immediately. At the same time, some treatments look very promising and will be available almost immediately.

In the early days of the crisis, the news reports focused on vaccines. We love the magic wand of technology, and rightly so. Thanks to science and technology, our lives are so much richer and more comfortable than those of our ancestors. Moreover, as Americans, we aim to solve problems once and for all and not just manage them and muddle through.

This time, however, we may have to settle for muddling through, at least in the short term. True solutions, such as successful vaccines, won’t be available for a year or more. Instead, the best hope—and it’s still just a hope—is an effective, readily available treatment that could prevent deaths, shorten hospital stays, and perhaps avoid hospitalization altogether. It would be a critical life-saver for health-care workers and first responders on the front lines, exposed to infected patients every day.

The good news about vaccines is that several research labs seem very close to developing them. Even better, these are not all the same vaccines; they work in different ways. We can test and see which ones work best, are easiest to administer, and have the fewest side effects.

The bad news, as we already mentioned, is that none of these vaccines will be ready immediately. Even if some are safe and work well, even if we cut through all the unnecessary red tape, there seems to be no safe and responsible way to start manufacturing and distributing them in less than 12 to 18 months. That’s because it takes time to test them first for safety and then for effectiveness in a large population.

Those schedules can be rushed, but only slightly. We still need to know if a vaccine will harm people with allergies, asthma, heart problems, diabetes, or other conditions. We need to know if a vaccine interacts safely with other medications that patients already take, and so on. The worse the Wuhan virus is, the more we can take risks to speed up to approve the vaccine and begin administering it.

Still, we civilians ought to remember the Hippocratic Oath that doctors live by, “First do no harm.” We don’t want to find that we mistakenly shortened the lives of everyone living with, say, an artificial heart valve or taking blood-pressure medication because we didn’t check thoroughly during the clinical trials. We want to balance the real risk of speeding too fast around these dangerous curves and the opposite risk of getting to the fire too late.

The same issues arise in treating those who are now infected. But we are willing to take more risks because they are already facing serious medical problems and may have few alternatives. (These applications take advantage of President Trump’s decision, well before this crisis, to allow the “compassionate use” of experimental drugs for those who are gravely ill and have few alternatives.) Meanwhile, testing is already underway right now for several treatments in the United States, Canada, Europe, Israel, and South Korea.

One of the most promising is an anti-malarial drug (chloroquine or hydroxychloroquine) probably given together with an antibiotic (azithromycin or Zithromax). Tests on that treatment are scheduled to begin in New York on Tuesday. In a week, we should know whether it works.

The success of this drug combo is not anecdotal, though the initial test population in southern France was small. Of the 30 confirmed COVID-19 cases in that test, 10 were control and 20 were treated. Some were given hydroxychloroquine alone, while others were given hydroxychloroquine plus azithromycin. By day 6, about 90 percent of the untreated patients still had the disease, half of the “hydroxychloroquine only” patients had it, but none of the “hydroxychloroquine plus azithromycin” patients did. None. In fact, those treated with the drug combo were virus-free by day five.

Earlier reports from China tell a similar tale, so the treatment is clearly promising. Moreover, since the anti-malarial drug has been on the market for decades, its general safety is not an issue. What is at issue is whether these results hold up in larger trials, which can be done immediately, and whether patients with underlying conditions face special risks. The same questions apply to another promising treatment, an antiviral called remdesivir, developed by Gilead. Other labs are working on still other treatments.

The good news is that these treatments have already been developed and can be tested immediately on confirmed COVID-19 cases. Results would be available quickly, too. The Food and Drug Administration (FDA) has been moving quickly to cut through rules and regulations to allow such testing. That’s crucial because doctors and hospitals are reluctant to use experimental treatments without FDA authorization and established guidelines. Unauthorized use would inevitably led to lawsuits, and doctors doing their best on the frontlines need to be insulated from those. Guidelines are important, too, to ensure proper use and to get the data needed to apply the treatments going forward.

If these or other treatments are successful, they could save lives quickly and relieve the intense pressure on doctors, nurses, and hospitals in hot spots.

Economic troubles on the horizon

Meanwhile, the entire economy is shutting down, and even the largest stimulus package is not as good as a paycheck. The dangers go beyond each hard-hit worker, family, and business. Each one in trouble hurts others. The knock-on effects will be vast and unpredictable.

We are in completely uncharted waters here. No modern economy has ever faced what the United States, Italy, France, Canada, Spain, Israel, and the United Kingdom are facing now. In the United States., the speed of the federal aid packages is unprecedented. So is the level of bipartisan cooperation in this age of deep ideological division. Let’s hope it can be sustained as each side uses the emergency to push its own priorities.

Whatever national and local governments do, the knock-on effects of unprecedented business closures and layoffs will be massive and difficult to diminish. The longer the closures last, the most devastating the effects, both short-term and long-term. If a corner restaurant shuts down, it may never reopen or regain financial stability if it does. Small businesses don’t operate with deep reserves of capital or big lines of credit with their banks.

When those businesses close, their cooks, waiters, cashiers, and owners may not be able to pay their rent, which puts them—and their landlords—in trouble. Restaurants’ landlords won’t be able to make their mortgage payments either. The banks or pension funds which hold those mortgages will feel the effects too, stretching their capital. The scale of these effects depends on how long the shutdown lasts—and that hinges on how well we contain and treat the virus.

One macro effect, already visible, is the precipitous drop in the stock market. What is happening is simple but painful: investors are repricing all assets to take account of much lower expected earnings. How much lower the market goes depends on how badly they expect future earnings to be hit and for how long. Similar repricing could happen in the real estate market, not only for homes and apartments but for commercial and retail space. Since all real estate is highly leveraged, lenders will feel the pressure, too, especially if many borrowers don’t have enough cash flow to meet their monthly obligations or if assets are repriced below existing mortgage obligations. We’ve seen that movie before, during the Great Recession of 2008, and it is not a “meet-cute” comedy.

The good news here is that banks are much better capitalized than in 2008, and the repricing may be modest if the health crisis is short-lived. Federal aid packages also could mitigate enough of the damage to keep most players–large and small–going.

Troubles like these ripple through the whole economy. Their cumulative impact is simply unpredictable. What is predictable is that their impact will be far greater if the pandemic lasts months instead of weeks, if the hot spots pop up in several large cities at once, and if banks and other financial institutions are affected.

Still, as economist John Cochrane has observed, we not only need to think about surviving the downturn, we need to start planning to restart these shuttered businesses once the crisis ebbs.

Keep calm, but carry a big sword

We are not the first to sail in uncharted waters. Medieval and early modern maps often had large gaps where no one had ever been. The cartographers knew nothing about the land and water in those mysterious places. They warned sailors with the phrase, “Cave! Hic Dragones!”: Beware, there are dragons here. That old message is as relevant now as the more encouraging one the British made famous during World War II, “Keep Calm and Carry On.” We do need to keep calm and carry on. But we also need to have our swords ready to look for opportunities to strike at the dragons lying in wait.

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