The Intellectual and Moral Bankruptcy of Arthur Laffer and Stephen Moore

These two individuals have written an extraordinary document entitled “When and Where Will the Recovery Occur? A National and State by State Analysis of the Economic Response to the Coronavirus”. It is the pinnacle of economic hackery.

Non-Reality Based Assertion 1: The US has done an outstanding job

“…the U.S. has done an outstanding job compared to other nations in limiting the death toll of the coronavirus in relation to population.” (page 3)

The following two figures suggest otherwise.

Source: FT, accessed 7 May 2020

Notice the US is the only country that does not have a declining fatality rate. And hence, on a cumulative per capita  basis, the US is fast catching up with Italy and Spain.



Non-Reality Based Assertion 2: Expect a short and shallow recession

“…in all of the other episodes of severe contraction—as well as in the current coronavirus collapse—the stock market has not only anticipated the collapse, but it has also estimated the magnitude of the collapse. From the culmination of the Roaring 20s through the 1930s, the stock market fell by some 90% from its high in 1929 to its low in 1930. In real terms, the stock market did not return to its 1929 peak until 1958.

A simple conclusion here is that the stock market, at present, is forecasting a downturn for sure, but that downturn, over the course of the next year or two, all included is not expected to be long-lasting or very deep.”

This assertion is based on correlations between detrended series depicted here:

Casual inspection of the graph would suggest to the informed reader that Arthur Laffer and Stephen Moore are using an odd detrending technique. GDP under Carter reached near 26% above trend, according to Laffer-Moore. And while the real S&P was by their estimates over 20% above trend in 2019Q4, it was 100% above trend in 2000Q1. Compare against the (admittedly problematic but familiar) HP filter estimates:

Notes: US log GDP, cyclical component from two-sided HP filter, default lambda for quarterly data (blue, left scale), and US S&P500 CPI deflated, logged, cyclical component (red, right scale). Source: BEA, Shiller, and author’s calculations.

The corresponding deviation in 2000 is 20%. Using HP filtered series, the adjusted R-squared from a regression of GDP on S&P is 0.23…


Non-Reality Based Assertion 3: The highly ALEC-Laffer ranked states will lead

“Some critics of reopening state economies and the national economy argue that this will adversely affect the health and well-being of American citizens. Saving lives and keeping Americans healthy has to be of premier importance. But we have looked at the evidence across states and there is little if any evidence that states with stricter anti-work and business closure policies have been healthier than states with more lenient policies. Moreover, there is increasing evidence that social isolation from stay at home orders and the big increases in unemployment and business failures are highly associated with negative health consequences, including increases in suicide, heart attacks, drug overdoses, child and spousal abuse cases, depression and deprivation.” (page 9)

This leads to Messrs. Laffer & Moore to argue that certain states will lead growth in the recovery, based on the ALEC-Laffer index:

The imposition of an income tax, a component of the Outlook ranking, is a signal for poor performance.

“But if the truth be known, the adoption of a state income tax is almost the perfect indicator of poor performance. Other states also have poor performance, but tax policies and the concomitant set of other anti-growth policies, such as pro-union laws, minimum wages, etc, are the trademark of anti-growth states.” (page 12)

But this is an assertion in search of evidence, as documented in this post. There is no robust association between the Outlook ranking and economic growth at the state level.

The document’s complete detachment from reality suggests that one should be circumspect in taking on their concluding thoughts (pages 13-14):

1) An important assumption underlying our optimism for the economy is that the federal government will not attempt to bail out states or spend trillions more on income redistribution programs. A bail out of the states would have a large negative impact on the U.S. economy. Federal spending is negative, not positive, for economic growth, especially if it is aimed at low priority projects, such as bailing out state and local pension funds, mass transit, green new deals and so on.

2) A recurrence of the virus with a second shutdown would have a very negative effect on the economy, but financial markets have already priced in that risk.

3) A payroll tax cut will strongly accelerate the recovery by rewarding both work and hiring.

4) If the national economy performs poorly, then the blue states are likely to suffer a bigger blow than the red states. Already, we have seen large increases in unemployment in states like Connecticut, Illinois, Michigan, New Jersey, New York, Ohio and Pennsylvania. These states already have very large budget deficits and their state budgets will be wrecked by a prolonged economic slump. We wouldn’t be all that surprised if a handful of states, counties, cities and special districts file for bankruptcy protections over the coming two years.

5) Every day that states keep their economies closed leads to a cascading negative impact on not only their own economies, but also the national economy. We are a 50-state free-trade zone. A strong national economic recovery will be inhibited if California, Illinois, Michigan and New York keep their economies shuttered into the summer months. These four states alone account for about one-third of the national output. ALL states would benefit mightily if California, Illinois, Michigan and New York open sooner rather than later.

I know of no modeling that substantiates items 1 and 3. In fact I know of studies that discount the propositions in 1 (Eichenbaum et al. (2020)) and 3 (CRS, 2019; Eggertsson).

Just say no to the snake oil.

60 thoughts on “The Intellectual and Moral Bankruptcy of Arthur Laffer and Stephen Moore

  1. pgl

    Are you sure the real authors of this nonsense weren’t Kevin Hassett, Jared Kushner, and Bruce Hall?!

  2. pgl

    Check out this from the last paragraph of page 1:

    ‘As for the national economy, the key forecasting insight to understanding the actual path to recovery following the coronavirus
    pandemic rests not within economic models, as they are mostly guesses and generally lack predictive powers. They are also
    all over the map. Garbage in, garbage out.’

    The authors of this nonsense are masters at garbage in – garbage out!

  3. baffling

    laffer and more continue the faux tradition of minimizing the risk and encouraging folks to reopen and mingle, while they themselves continue to self isolate in the safety of their own homes. hypocrisy at its finest, if not for the following.
    donald trump, his vice president and their closest associates will get coronavirus testing DAILY. why? the donald is pushing for the reopening of all states, and has absolutely NO CONCERN about the folks in those states getting real time testing to examine their safety and the welfare of others. this means there will be people infected, and die, as a result of this policy. if donald is pushing for this, in large part by his insistence that the virus is not that bad and under control, why should he and his closest associates get DAILY coronavirus tests? this makes absolutely no sense, unless one is practicing the do what i say, not what i do form of hypocrisy. why is the white house promoting the reopening of the economy while it doubles down on white house testing? hypocrites.

  4. baffling

    the trump led economy results in 14.7% unemployment, with a broader reading indicating the unemployment rate is closer to 22.8%. Trump has been able to beat obama in unemployment, and wiped out all of the gains since the great recession. making america unemployed again, a million job losses at a time. the question is whether this is trump policy, or republican policy? inquiring minds want to know.
    trump has officially become the greatest unemployment president of ALL TIME! well done. next will be his assault on the senior citizens of the nation, a thousand deaths at a time. well done mr president.

    1. Anonymous

      And how is this his fault? If you lock down the nation/economy, expect people to lose their jobs. That isn’t the downside of “Trump Policy,” it’s common sense. Inquiring minds want to know if Obama had to deal with a global pandemic and a mainstream media that is never satisfied…

      1. baffling

        trump took credit for the obama recovery. he gets to take credit for the worst economy in history. in case you’re wondering, obama would not have denied the pandemic early on. he would have addressed it so that we could open and recover in a reasonable time period. trump chose to ignore and deny what the future held. that is why we had much wider spread and much more difficulty controlling the disease. if trump and his cronies had been even halfway competent, we would be in a much better position than we are today. ignoring reality because it is inconvenient is a poor leadership trait. trump owns it.

  5. Moses Herzog

    The thing that bothers me the most, is, they (Moore Laffer, and friends) are fully conscious of the fact they are lying when they release this stuff. FULLY conscious they are lying. I can put up with lots of errors and false things from people if they have good intentions or are being sincere. But knowingly lying is something I have zero tolerance for.

    1. pgl

      But don’t every Trump sycophant realize it is all a lie? Of course Moore and Laffer have been lying for 35 years.

  6. spencer

    On Wall Street, both the buy and sell side, there is constantly enough demand for economists to tell people what they want to hear — very conservative economics —
    to support people like Arthur Laffer that it does not matter if they are right or wrong. Basically, I look at it as entertainment and I bet many of the portfolio managers that support it them also look at them this way. Nothing they say is taken into consideration when the managers actually get down to the nitty-gritty of constructing a portfolio. A client of mine, a economist-stragetist at Fidelity arranged to have Laffer speak at the Boston Economist Club once. Its membership is dominated by the Boston investment community. But she had to defend taking his service to many of the other members.

  7. Moses Herzog

    I saw Menzie referenced Gauti Eggertsson. I know Eggertson wrote a paper together with Krugman after Krugman won the Nobel Prize. I was wondering, since Barkley Junior has informed all of the economics community of Krugman’s “notorious record of not giving credit to others”, why wasn’t Eggertsson afraid to cowrite a paper with Krugman?? Or why would so many economists who could cowrite papers with nearly any colleague of their choosing cowrite a paper with a man some lone straggler said had a “notorious record of not giving credit to others”??? Why would they do that?? Probably because only a SUPREME nutjob could get indignant about wrongdoings that never happened.

    Fajita was “so offended” by this Barkley Rosser manufactured “transgression” Fajita co-wrote two papers with Krugman, one after Krugman mentioned his work (and Dixit’s, and Stiglitz’s) in his Nobel Prize speech. How does one get the attention they are psychologically desperate for if their own work doesn’t warrant the awarding of a Nobel Prize?? Well, you wander around the internet making nutjob claims about social “misdeeds” of a high-profile economist which never happened and that no one else is offended with.

    1. Barkley Rosser

      Look, Moses, it really is time to move on beyond this, which has nothing to do with these current issues. Again, you brought this stuff up in a failed attempt to show me falsely accusing Krugman of “stealing” my work, which I never did, although I essentially did so of him regarding others, and quite a few more than just from Fujita. For a much fuller account of this dirt, which I am not going to recount here, see pp. 23-26 of my 2011 book, _Complex Evolutionary Dynamics i Urban-Regional and Ecologic-Economic Models_,” Springer, but none of those whose material he reproduced without citation were me. But there is nothing any of them can do; Krugman gets the press’s attention and praise while they are ignored.

      Regarding Eggertsson, if one is coauthoring with someone then cleatrly one is going to get credit for dong so, and coauthoring with a Nobel Prize winner is certainly likely to get one published in a highly ranked journal than not dong so. My own suspicion regarding Fujita and Krugman is that Krugman offered to coauthor with Fujita at the end of the 90s as he knew Fujita was a much better mathematician than he is, so it would improve the work, and indeed the 1999 book by the two of them with Venables, _The Spatial Economy: Cities, Regions, and Internationa Trade_, is an excellent classic, with indeed Fuijita also seeing the personal logic of coauthoring with the widely cited Krugman as a way of getting attention and publication, just as with Eggertsson, even though Krugman had not gotten to Stockholm yet. This is all pretty obvious.

      As it is, I have actually discussed this with Fujita, whom I shall say is very shy and low key. He and a couple of other Japanese economists (Uzawa in particular) really do deserve to get the prize, although so far not a single one has.

      Anyway, I shall quote from a paper in Regional Science and Urban Economics, 2010, (I initially misstated its name before) by Fujita with J.-F. Thisse from after Krugman received his prize and engaged in his dismissal in his acceptance speech of Fujita’s work. “New Economic Geography: An appraisal on the occasion of Paul Krugman’s 2008 Nobel Prize in Economic Sciences,”

      “Paul Krugman has clarified the microeconomic underpinnings of both spatial economic agglomeration and regional imbalances at national and international levels. He has achieved this with a series of remarkably original papers and books that succeed in combining imperfect competition, increasing returns, and transportation costs in new and powerful ways. Yet, not everything was new in New Economic Geography.”

      As somebody who claims to have spent time in East Asia, if not everso polite Japan, perhaps you get what is going on in that statement. Indeed, one reason he may have coauthored with Krugman in the late 90s was indeed out of hope to share in the prize that was clearly going to come Krugman’s way eventually, but it did not work out. So best he could do was this modest, if extremely accurate, claim.

      You really do not know what you are talking about here, Moses. It really is time to move on, or I shall post even more unpleasant stuff about PK, which I would prefer not to do. This really has nothing at all to do with anything we are seriously discussing here, especially given that your original motive for dragging this up, that I supposedly was making false accusations against Krugman, or whining on my own behalf, have fallen completely flat. Time to move on, and I am sure Menzie and others would agree.

      1. Moses Herzog

        Why hasn’t Krugman “stolen” some of your work?? That is strange…… Maybe some day. Keep us posted. Good luck with the textbook also. I’m pulling for you.

        1. Barkley Rosser

          Wow, Moses, because as I myself noted, I have not published anything all that innovative or important in this area, although I have published in this area, Krugman has not cite me and I do not care, but this is way down among the many areas I have published in for Google Scholar citations. Unlike you, I do know my own pubclicatoin record.

          This is getting increasingly ridiculous, Moses. You brought up this whole completely irrelvant topic out of a failied effort to show that I was claiming Krugman had “stolen” from me. That was a lie. Rather than admitting that you were caught lying, you are now trying to somehow shame me for not having been stolen from by Krugman. Do you not realize how utterly insane this is? It is fine with me that he has never cited me. Got it? I am not going to further comment on this particular topic.

          So, let us consider how indeed you are indeed behaving like Trump, which has been pointed out. So, pgl agreed with you that I was wrong on the Very Important Matter of the spelling of the last name of the late Ronald McKinnon. I was indeed misspelling his name, adding an awful “a” between the M and the c, and when you pointed out how disrespectful I was being misspelling his name, pgl agreed with you that I was wrong. I then recognized that indeed I was wrong. I then apologized and then started spelling his name correctly.

          But then when pgl supported me on a point that yoy and I disagreed on, you instead did not respond on the substantive issue, but shifted to making personal attacks on pgl, who plays it straight, deciding that the fact that he posts on Econospeak with me., a top 100 econoblog, showed somehow that he is somehow awful.

          Then we have baffling, who very reasonably pointed out how stupid and irrelvenant ooe of your worthlesss links was. Oh, rather than responding on substance, you also got personal. He had a “man crush” on me, horrors. What a worthless piece of scum you are Moses.

          Frankly, Moses, if I was a hard ass I would say that Menzie and Jim should simply ban you from this blog. You really have gone over the line. But, I am not going to demand that. Also, I shall say no more on this Krugman matter (although I could), and I shall no more mention the spouse of your father. Please drop this and move on.

  8. baffling

    and now a pence staffer tests positive for coronavirus
    why are we even testing these people, if the policy is to infect and create herd immunity anyway? if you are not afraid of the virus, then you should not be testing for it. neither trump nor pence wear masks, so apparently they are not concerned about the virus. save the test for somebody who will utilize the results properly.

    1. pgl

      The wife of Stephen Miller. I think Katie Miller will get past COVID-19. But being married to the racist architect of Trump’s abuse of people from Latin America? That really has to trouble her – assuming she has a soul.

  9. macroduck

    Lie, rinse, repeat. These guys have been making false claims about the links between economic performance, taxes and regulation for their entire careers. This is just a repackaging of the same old slop.

  10. Barkley Rosser

    Regarding Point 1, both UK and Sweden do not yet show noticeable declines in new infections either. But then, both of them have had slow-t0-start or loose polilices regarding the virus, and there are some others still shooting upwards, such as Russia and Belarus, the former a slow-to-start and the latter almost the only one out there with now restrictions.

    1. B.A.Badger

      Professor Rosser,
      Granted my source is the NYT, but it has been reporting Sweden as a country with declining incidence of infection for at least a week. Is the key to your statement the mofifier “noticeable?”

      1. 2slugbaits

        B. A. Badger I think it’s safer to say that Sweden is seeing a plateauing of new infections rather than a decline. You can judge for yourself. Here’s the link to the Swedish data:
        You’ll want to use the first tab for incidences of new infections. A couple of caveats. Sweden summarizes reports from regions and each region has a different policy as to how often it submits its report. For example, several regions do not report data on weekends, so you will see drop-offs and spikes. It’s best to use a seven day moving average to smooth out different regional practices. Also, the most recent data tends to show a sharp drop, but then a few days later additional cases will be added. The lesson there is to be a little bit skeptical of the last week’s worth of data because it will almost certainly be revised upward.

        1. Moses Herzog

          I haven’t looked at it yet, but I bet that’s a superb link you just gave trustability-wise and datapoint-wise. I wonder if Google Translate will work to make it more navigable or….. do links work on Google Translate or you have to kind of glance between windows?? I guess I’ll figure it out and “catch as catch can” as an Owen Wilson movie character once said.

  11. Moses Herzog

    From the Sarah Owermohle authored story in Politico:
    “The former director of the Biomedical Advanced Research and Development Authority, he was abruptly transferred from the multibillion-dollar agency — which is heading up coronavirus vaccine funding — to a testing project in April.
    Bright alleges that he was one of the few officials sounding a warning about hydroxychloroquine, the malaria medicine that the president had championed. The drug has been linked to serious heart rhythm problems.
    Bright says that he raised concerns that the coronavirus could spread beyond Asia beginning in January but was met with ‘indifference which then developed into hostility’ by leaders of the Department of Health and Human Services.

    But the discord with senior officials started well before then, according to the complaint. It alleges that Bright was pressured to extend a contract with Aeolus Pharmaceuticals by a pharmaceutical lobbyist, John Clerici, because the chief executive was a friend of Jared Kushner, President Trump’s son-in-law. Bright said he stood his ground on the contract, which fueled ongoing tension with officials — including Robert Kadlec, HHS assistant secretary for preparedness and response, whose office oversees BARDA. The complaint says that Bright and Kadlec disagreed in part over Clerici’s ‘outsized role.’ ”

    The story goes on—-
    “Bright has previously said he believed he was removed from his BARDA role overseeing billions of dollars of vaccine, drug and test funding, because of his hesitation to back hydroxychloroquine. Others within HHS have disputed his accusation, saying he signed off on the request for the FDA to authorize emergency use of the drug in late March.
    By the time the coronavirus pandemic began mounting in January, Bright said leaders including Azar and Kadlec were gunning for his removal, after multiple disputes over funding contracts with political or personal ties.
    Bright alleges he sounded the alarm about the coronavirus in a January 23 meeting and pushed for urgent funding, but was excluded from subsequent meetings because, as Kadlec chief of staff Bryan Shuy told him, he set off “quite a s— storm” and offended leadership.
    It took HHS until April, when FDA’s vaccine chief Peter Marks presented a plan to accelerate vaccine development, for department officials to embrace an aggressive vaccine approach, Bright said.
    ‘Dr. Bright was transferred to NIH to work on diagnostics testing — critical to combatting COVID-19 — where he has been entrusted to spend upwards of $1 billion to advance that effort,’ said HHS spokesperson Caitlin Oakley. ‘We are deeply disappointed that he has not shown up to work on behalf of the American people and lead on this critical endeavor.’ ”

    1. B.A.Badger

      The facts related above are from Dr. Bright’s whistle blower retaliation complaint. Dr. Bright is an “excepted” employee. What he is “excepted” from is Title 5. That means that he does not obtain protection for whistle blower retaliation. Therefore, the bozos at HHS can legally use adverse employment actions to try to get him in line with the department story line. From my reading the complaint, I believe that Kadlec and Azam were ticked off that Dr. Bright was invited to participate in White House briefings and they were not. Couple that with Congress giving the head of BARDA (Dr. Bright) the pen for spending money directly, their power was being eroded. I hypothesize that the transfer had less to do with hydrochloroquine and more to do with the fact that the subordinate was showing up his superiors (plus they wanted control of the money).

      The most interesting part of the complaint is the allegations against Dr. Kadlec. If the allegations are true–that a particular lobbyist was able to get millions to his clients and by-pass the normal process for allocating funds, then there will be at least a shake-up at HHS, if not FBI agents.

  12. Moses Herzog

    “HHS officials pointed to a project with tech company Oracle that they said would track hydroxychloroquine use and side effects, Bright said. Senior officials told POLITICO in March that they had grave concerns about the Oracle project and the ‘wild goose chase’ in pursuit of hydroxychloroquine.”

    “Wild goose chase”—Sounds like our lovable nutjob Giuliani wandering around Ukraine.

  13. Alan Goldhammer

    To further add, I know of nobody who has said that #2 has any bearing in reality. My own personal feeling is if there is a major spike the stock market gains of April will disappear in a flash. While this link is about value vs growth investing: there is a citation about a lot of companies dropping out of S&P indexes because they will have negative trailing earnings over 12 months or their market caps will drop as well. These indexes are used by mutual funds and ETFs and if there is a lot of shake up it will cause some havoc. I’ve seen lots of flight from S&P 500 funds over the past four weeks. I don’t think Laffer and Moore are taking this into account.

    1. baffling

      i saw that article headline elsewhere, but ignored it until you provided the link alan. thanks. it points out a very interesting issue related to index funds and the like. what defines growth and value will change dramatically what SHOULD be included in these indexes. will be curious if the indexes try to redefine some of this, so as not to lose out on some big power players whose status will temporarily change. there have been a number of pundits who argue for stock picking as opposed to passive indexes right now. while they used slightly different logic, not wanting to buy losers with the winners right now, the result is the same. index and other passive investments may not be buying the items you think they are buying over the next year. this article pointed that out nicely. stock picking may be back for a couple of quarters.

  14. Moses Herzog

    Another thing I just noticed, you know you keep hearing the same catch phrases used in the orange creature’s rotted out social circle. Another one is “outsized role” to describe John Clerici. Anyone else hear this phrase used before for Ivanka, Jerod Kushner, Mike Pence, or Giuliani?? How many times now have we heard these similar type red flag terms like “outsized role” in describing the pus drainage composing donald trump’s social circle??

    I’ve said before James Kwak was/is a really great writer and would narrow in on these things. Professor Kwak might have done something like a “Top 20 List of Red Flag Terms/Phrases Used Around the Trump Administration” when he blogged on a regular basis. I know Menzie is sharp enough to come up with such a hypothetical list. I’d love to see Menzie do a post like that, and I know he’s got it in him somewhere.

  15. B.A.Badger

    Long ago I read a paper by Dr. Laffer, et al expressing the opinion that state growth potential correlated with state taxation levels. The usual suspects California, NY, Illinois, etc were ranked poorly. I can’t help but think that his state taxation hypothesis affected his opinions in this article–particularly the rankings. I know that Dr. Laffer moved from beautiful San Diego CA to Nashville TN because of the relative tax structures. Even though the mobility elasticity has got to be low in a Covid environment, I would like to know what you think of this article, which (with multiple caveats) seems to conclude that rich people move out of high tax rate jurisdictions.

    I also note that California is expected to lose a representative seat.

    I believe Gov. Newsome (D-CA) is handling the pandemic quite well. But, I have no clue how we can continue our Covid caused $54B deficit this year. And, I do not believe that McConnell (R-KY) will allow a CA bailout. Therefore, my high taxation rate state will have to raise tax rates. I don’t mind, I in San Diego (after leaving Madison WI) for the sun. I will continue to pay the sun tax. But, a lot of rich people I knew, and several businesses I represented, have moved to Texas and Florida. So, I am concerned that rich people and businesses will leave before the bill gets paid.

    1. 2slugbaits

      These are all good reasons why we should abolish the states…as though we needed anymore good reasons. If Laffer is truly interested in more efficient tax structures, then he should be supporting uniform tax rates across the states. I was always taught that tax avoiding behavior was a source of economic inefficiency and created deadweight losses. As to people moving to Texas because of the zero income tax rate, the bad news is that they also have to live in Texas. Been there, done that. Couldn’t wait for my permanent change of station DD Form 1610…my golden ticket out of that godforsaken hellhole.

    2. Baffling

      Texas will join the blue states in budget hell. Sales tax collection has plummeted, and oil collapse has left a huge hole in revenue. My guess is florida will also implode. Alot of local tax is related to visitor hotel taxes, which is evaporating as well.

  16. ooe

    According to Peter Thiel , one of Trump’s backer, he indicated the mal-administration would end in a calamity. he was right. + 21 million jobs lost (March & April) highest unemployment since 1940. + 76000 American dead and counting from Covid 19 from a situation he could have ameliorated if he had acted in Jan or Feb.

  17. Steven Kopits

    Reporting for the day May 8, the US had the 5th highest death rate (for this day alone, not cumulatively), at 6.8 per million. Interestingly, Sweden was No. 2 at 9.7 per million.
    Here’s the top fifteen in order (worst at top) of 84 countries reporting deaths today:

    Italy’s cumulative death rate is 14%. The US stands at about 6%. There is no possibility that the US death rate will approach Italy’s.

    1. Baffling

      It is possible to reach much higher levels if we fail to embrace social distancing over the next 6 months steven.

  18. Steven Kopits

    At DOW 24,000, the stock market really does not feel the pandemic is a big deal, given that GDP is probably down on the order of 30%. Nor does it appear to be discounting another shut in during the fall. This past week we saw the impact on the oil market begin to migrate from gasoline to distillate. To me, gasoline is a transient crisis, because it represents people staying at home. Distillate suggests more lasting damage to the economy.

    I think it is very difficult to make predictions at this point, but I think the stock market is taking a highly optimistic view of likely outcomes.

    1. Johnny thanks James

      it’ll be a V. Relax man.
      November and Joe Biden are waiting for the POTUS, it’s only statistcs – will manage that.

      Stop the fearmongering !

  19. Bruce Hall

    If these data are close to correct, it would appear that lower income Americans have been most hurt by state governors shutting down the economy (no, not Trump’s orders). Look at average hourly earnings. You can increase the average by everyone earning more or dropping out the lower income people. (Yes, I know it’s preliminary).

    This epidemic has been primarily New York, New Jersey, and Massachusetts. Most off the rest of the states have been hurt by over-reactionary governors killing their economies.

    The interesting thing about New York is that a significant portion of deaths have been in nursing homes and that has been a direct result of New York policy.

    What else is interesting is that governors have been taking the easy route in their shutdowns. Rather than targeted actions where the problem is significant, they have chosen to apply the rules to their entire states. Oh, that’s to keep everyone safe. Sure. and

    Hydroxychloroquine appears to have some safety issues with Covi-19 patients; it doesn’t seem to be a problem with Lupus or rheumatoid arthritis patients who had been complaining about supplies being diverted. Some countries, such as Turkey, use it for all patients who have been diagnosed with Covid-19. Critics say that Turkish statistics are crap.

    In a small study (similar to some initial hydroxychloroquine studies,/i>) Remdesivir appeared to shorten the infection period of patients with Covid-19. It is expected that the cost of Remdesivir will be substantially higher than hydroxychloroquine.

    Scott Gottlieb, the former commissioner of the Food and Drug Administration, said he expected there was enough evidence for the agency to issue an “emergency use authorization” for remdesivir.

    “Remdesivir isn’t a home run but looks active and can be part of a toolbox of drugs and diagnostics that substantially lower our risk heading into the fall,” he said.

    … Remdesivir, which must be given intravenously, is likely to remain a treatment for patients who are hospitalized. But it is also likely that it will be most effective in patients who have been infected more recently, said Nahid Bhadelia, medical director of the special pathogens unit at Boston Medical Center.

    … Peter Bach, the director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Medical Center, said he is eager to see the data from the NIAID study but renewed his criticism of Gilead’s severe study for lacking a control group of untreated patients. That would have allowed researchers to make important conclusions about how the drug works that are just not possible now, he said.

    “They’ve squandered an unbelievable opportunity,” Bach said. “It’s not going to tell us what to do with 80-year-olds with multiple comorbidities compared to 30-year-olds who are otherwise healthy. We’re still going to be foundering around in the dark, or at least in a dim room, when we could have learned more.”

    There has been a lot of speculation around a vaccine for Covid-19. The issue with Covid-19 may or may not be the same as issues with influenza viruses or common cold viruses: mutation. There is hope for a useful vaccine within a year, but we simply don’t know enough about the virus mutability:

    There is no guarantee that the virus will not come back in a second wave. Are we ready to wash, rinse, and repeat? Keeping the state economies shut down is not solving a problem; it is exacerbating it. Yes, there is a great deal of fear because of the uncertainty. But we live with far worse certainties and don’t let them affect our economic policies.

    1. Bruce Hall

      Correction… the paragraph that reads:
      In a small study (similar to some initial hydroxychloroquine studies,/i>) Remdesivir appeared to shorten the infection period of patients with Covid-19. It is expected that the cost of Remdesivir will be substantially higher than hydroxychloroquine. has an incorrect link.
      The correct link is:

      1. Moses Hall

        @ Bruce Hall
        Just trying to imagine you claiming President Obama was doing the “correct” medical policy because Turkey said it was a great treatment. You’re a living/breathing satire cartoon Bruce, and you’re not even cognizant of it apparently.

        Bruce, you’re so lacking in a cogent argument, it’s really hard to believe you’re not a research assistant at the “American Legislative Exchange Council” for Arthur Laffer. It’s mostly a place for Reaganites with no marketable talents to find idiots like you to pay for their pensions through charitable donations. It’s no different in any aspects from Alex Jones selling colloidal silver and non-fluoride toothpaste. You are the archetype “fool born every minute” that these people live a cushy life on.

    2. 2slugbaits

      Bruce Hall lower income Americans have been most hurt by state governors shutting down the economy

      Hmmmm….one of the worst hit occupations has been workers in meatpacking facilities. They weren’t hurt because the governors shut down those industries; they were hurt because the governors did NOT shut down those industries.

      I don’t blame Trump for shutting down businesses. I blame him for pushing governors to open too early. I blame him for zigzag policies that changed from day-to-day and press conference to press conference. I blame him for not supporting bailout packages for the states. I blame him for blathering and lying for 2 hours every day with those inane “updates” that were nothing more than a substitute MAGA rally. I blame him for not taking the threat seriously back in January and February. I blame him for putting Jared “Mr. Crony Corrupt” Kushner in charge of some of the PPE distribution schemes. I blame Trump for encouraging governors to open up even though those states didn’t meet Trump’s own guidelines for when to open up. Early on Trump told us that he was in charge. Then when things turned south he dumped the problem onto the laps of the governors. And having dumped the problem onto their laps, he doesn’t want to provide the funds that would allow them to execute responsible policies.

      What else is interesting is that governors have been taking the easy route in their shutdowns. Rather than targeted actions where the problem is significant, they have chosen to apply the rules to their entire states.

      This is simply wrong. Michigan is an outlier in that regard, so don’t try and pass it off as typical. Most governors have established regional strategies where feasible; but it’s not always feasible. One thing that’s become apparent is that when governors do open up one part of the state, the problem quickly migrates to those newly opened up parts of the state. So maybe Michigan has it right.

      Yes, there is a great deal of fear because of the uncertainty. But we live with far worse certainties

      And why haven’t you filled out that job application for one of the Tyson meatpacking plants? C’mon big guy. Step up and put your money where your mouth is. Or are you as brave as President Bonespurs? Or maybe you’re just impatient and have impulse control issues like the kid who couldn’t resist eating the marshmallow as soon as the psychologist set it on the table.

      1. noneconomist

        And, as many Trumpers might hope, get that job in a meatpacking plant on the same day ICE conducts raids similar to those in Mississippi last fall (“680 undocumented workers arrested in record-setting immigration sweep ” at seven Mississippi food processing plants) Sure, the bacon might not be brought home for a while–ok, for a long while–but making American great again can just as easily begin with a knife cutting dead pork that must be processed.
        After which, he might head to Iowa and perhaps get a job on one of those dairy farms that seem to hire plenty of undocumented Hispanics. He might even be lucky enough to get hired at the Nunes family farm, which located to Iowa from California several years back.
        He’ll always be welcome in any of the California valleys where growers (many Trump supporters, of course) are having difficulty finding workers to tend the country’s most profitable agricultural sector. Much of work begins before dawn and may conclude before the heat hits the low 100’s (but, yes, it’s generally a dry heat).
        MAGA! American jobs for American workers! Welcome to the meat line, the milking sheds, and the onion fields, Bruce!

      2. spencer

        The jump in wages is due largely to the changing composition of employment. People working at home tend to be professionals and other highly skilled employees. In contrast the laid-off are generally the poorly paid — a waiter of a retail clerk can not work from home. So when you get a lot of highly paid employees included in the data and a lot of poorly paid individuals excluded from the data it will tend to distort the data.

    3. Baffling

      Peter bach has an issue with no control group for severely ill patients. It is ethically challenging to give dying patients a placebo, hence the lack of control group. That said, there are many severely ill patients around the country who could form a pseudo control group-over 70,000 of them. Bach’s complaints are ridiculus.

    4. Menzie Chinn Post author

      Bruce Hall: So, full speed ahead. You’re willing to sacrifice each and every low-income worker’s life in order to ensure corporate profits remain high. That’s what you’re saying when you say low income workers are hurt by shutdowns; but the counterfactual is they (who are in higher exposure occupations) will die in higher numbers. Well, I’m glad you’re on the lookout for threats to corporate profitability.

      1. 2slugbaits

        Menzie I suspect Bruce Hall would applaud the Wisconsin Supreme Court justice’s distinction between meatpackers and “regular people.” Meatpackers are expendable riff-raff. It’s their duty to die on the production line so that “regular people” like Bruce Hall can enjoy steaks and chops.
        Talk about moral bankruptcy. Apparently it’s not just Stephen Moore’s character flaw. Some of the posters here have that same problem.

      2. Baffling

        Low wage earners can easily be made whole with unemployment insurance. This is very doable. Why is bruce against that path?

        1. Moses Herzog

          @ baffling
          I’m not really disagreeing with you in this specific instance, but have you ever heard the saying “they get you coming and going”??

          I think it’s a mistake to re-open. That being said, it’s hard to put a finger in these people’s faces when they haven’t paid 2 months rent, the rent owed is accruing to be paid later, and they don’t even know if a job is waiting for them when this is all done. Then you have state governments controlled by Republican legislators that are more than happy to “hold up by gunpoint” their own constituents to have them pay interest to get their hands on their own benefits. Imagine the chutzpah it takes to tell people they can’t have their unemployment benefits without in essence paying a fee to the state. That is what is happening in Oklahoma right now, and no one can tell me Republican lawmakers didn’t know Conduent wouldn’t attempt this hold up of taxpayers’ money before they awarded Conduent the contract to handle the debit cards. The government agency “Oklahoma Employment Insurance Commission” is fully aware of these immoral acts, and apparently Republican legislators in Oklahoma think these dumb Okies are too dumb to put up a backlash at their voting locations—and I am sad to day, the people of Oklahoma are so damned dumb and illiterate, Republicans are correct not to feel any fear pulling this stunt on working class Oklahomans, as 2/3+ of them have no idea it is the legislators who decide who gets the contracts and how they are applied.

          1. Moses Herzog

            * “….. and I am sad to say…..” it should say in my last elongated sentence there.

    5. pgl

      Blaming my city for Trump’s incompetence again? As far as Hydroxychloroquine – you told it was approved by the FDA for the use against COVID-19. Another one of your millions of lies – so I guess you figured no one would call you on it. And yea on May 1 the FDA did approve the use of Remdesivir but some lying clown said on that very day it had not been approved by the FDA.

      Yea – there are a lot of other lies and very stupid statements in your latest rant but it seems others have decided to address those. Keep them coming Bruce – this was why your own dog is rolling on the floor laughing.

    6. pgl

      Bruce Hall continues to blame New York City of the COVID-19 deaths in nursing homes. Of course this is Bruce Hall lying in the service of Donald Trump. Yes there is a problem as noted here:
      This story notes several things that the liar Bruce Hall forgets to mention. (1) the COVID-19 issue here is overwhelming thanks to the massive incompetence of Donald Trump; (2) it is a state policy not a city mandate; and (3) what our Governor said:

      “They have to readmit COVID-positive residents, but only if they have the ability to provide the adequate level of care under Department of Health and CDC guidelines,” Cuomo said, referring to the Centers for Disease Control and Prevention. “If they do not have the ability to provide the appropriate level of care, then they have to transfer that patient or they call the Department of Health, and the Department of Health will transfer that patient,” Cuomo added.

      Yes this is a huge task for the NY health system but we are trying. Of course, Donald Trump refuses to do very much as he declares himself not to be responsible. So Bruce Hall’s mandate is to continue with these disgusting lies. MAGA!

    7. baffling

      ” lower income Americans have been most hurt by state governors shutting down the economy”
      so let’s be clear here, bruce, you are arguing there should NOT have been any shutdown to control the spread of the virus, correct?

    1. pgl

      Michigan is third in the nation behind New York and New Jersey for total number of deaths.

      Bruce Hall is hunkered down in his mother’s basement because of this. He will not even go shopping so his mom has to do it for him.

  20. 2slugbaits

    From the Laffer paper:
    From the Laffer paper:

    An important assumption underlying our optimism for the economy is that the federal government will not attempt to bail out states or spend trillions more on income redistribution programs. A bail out of the states would have a large negative impact on the U.S. economy. Federal spending is negative, not positive, for economic growth, especially if it is aimed at low priority projects, such as bailing out state and local pension funds, mass transit, green new deals and so on.

    2) A recurrence of the virus with a second shutdown would have a very negative effect on the economy, but financial markets have already priced in that risk.

    So isn’t it fair to ask if the markets haven’t also priced in the likelihood that the federal government will in fact bail out the states, contrary to the assumption in Laffer’s paper? Sounds like Laffer is trying to have it both ways.

    For someone who likes to flatter himself as a “supply side” guy, he sure seems to have missed one of the most obvious impediments to a strong recovery. Over the years the supply chain has become quite efficient; but the flip side of an efficient supply side is that it’s also brittle. The main reason we have an ongoing shortage of toilet paper isn’t that people hoarded it two months ago. The main reason is that economic efficiencies in the toilet paper market bifurcated that market into two separate sectors, an institutional sector and a home sector, with suppliers producing different grades of toilet paper for each market. And individual suppliers had specific supply relationships. So makers of institutional paper only had business relationships with institutions, and makers of home paper only had business relationships with grocery store chains. Demand for institutional paper fell off a cliff as people stayed at home, didn’t go to school and didn’t go to airports. It has taken a long time for production and supply relationships to adjust. And it will take a long time to readjust again as states open up their economies. We saw a similar story with meat suppliers. It wasn’t just that packing plants couldn’t keep up with demand as workers got sick, it was also the case that packing plants had to readjust from institutional customers (e.g., restaurants) to grocery stores. Businesses are going to be slow to commit to old supply chain relationships. This will result in a certain amount of inherent economic inefficiency that is likely to last for quite some time. Businesses will rely upon demand “pull” signals from consumers and institutions before committing to the kind of rigid supply chain relationships that characterized the economy before the pandemic, and those demand signals will evolve slowly as people come to a new sense of normal. But our good buddy Laffer completely missed all that. Instead we got the usual chatter about “pro-growth” and “anti-growth” states and income tax rates. Ugh.

    1. pgl

      “Sounds like Laffer is trying to have it both ways.”

      Sounds like Laffer was an economic adviser to Herbert Hoover.

      1. noneconomist

        Except when Laffer would have explained to Hoover how/why budget deficits don’t matter?
        Guru to Dick “Reagan proved deficits don’t matter” Cheney? Of course.
        Not to mention the Reaganites who, in 1981, were horrified with the approaching $1Trillion debt but who were quiet 8 years later with the debt approaching $3Trillion.
        After all, Artie was responsible for putting that shot of adrenaline into the Kansas economy. Or, was that strychnine?

        1. pgl

          Back in 1983 during some conference on the macroeconomic disaster following Reagan’s tax cut, some insane supply-sider told us that the tax cuts worked. Yea – the worst recession since the Great Depression. I was asked to provide the rebuttal where I noted the role of tight money. I think you get the drill without my 10 minutes of citing facts and theory. Laffer showed up the next day and someone asked him about what occurred the next day. His response? “I went to Yale so I get Keynesian economics”. The audience gave this two faced jerk some appropriate cat calls.

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