PANDEMIC | 2. What Affects the Spread of the Coronavirus?

This is the second of a series of posts on the subject of the coronavirus death rates by country. See also posts on March 19 (#1, Why is Germany's death rate so low?) Virus Deaths Tracker (FT).

March 20, 2020–The New York Times has an informative article today showing the growth of COVID-19 cases in each country. A sample of the charts is at right, for the United States. It is illuminating to see the same exponential pattern occurring in virtually every country that has a significant number of cases. (It would be easier to compare countries' data if all of the countries were on the same chart, preferably logarithmic, so that the rate of change is easier to gauge.)

The charts show a series of daily snapshots of the progress of the novel coronavirus in each country. The chart shows the number of confirmed cases of infection by the virus. What are the factors that determine the spread among countries like Italy on the high-mortality end and Germany on the low end? Here are some early theories:

1. How quickly a country created social distance. Hand-shaking (until this pandemic) has become a world-wide custom. But some countries are used to even closer social greetings, such as hugging and kissing. Amsterdam is proud of its three-kiss greeting (that is the meaning of the three Xes in its shield). Self-isolation may be harder to enforce in some countries. The closeness of families in Italy is viewed as a problem in getting more vulnerable age groups in the population to keep their distance from socializing younger generations.
2. A city's density, as an indicator of how much of a magnet it is. If, as most people believe, the virus started in Hubei, China, then the virus somehow made its way from there to each country, probably carried by human beings. Travelers on busses, trains and airlines are likely carriers, and one can be a carrier with no symptoms. Hubei is center of transportation and manufacturing system in China, which made it an easy place to spread to virus. New York became an epicenter because of its central role in communications, finance, fashion and technology.
3. How much testing is done, when it is done, and when it is reported. New York State has authorized a range of manual, semi-automated and automated testing approaches and the numbers of confirmed cases of the SARS-CoV2 has been rising rapidly. The State says it is now testing 10,000 people a day, has tested 32,000 people in total, many more than any other state, and has found 7,100 cases of positive readings, nearly 40 percent of the total for the nation (19,624). 

The Times story references the need to "flatten the curve," i.e., the need to take quick action to test people with symptoms of the virus and quarantine them and provide hospitalization for the very sick, who will suffer from exacerbation of respiratory, heart or other immunity problems they have.

Additional Data to Get. The charts show the "curves" themselves in each country, indicating confirmed infections, so that we can better understand the number of people who are hospitalized or quarantined, and the coming demand for medical facilities. Now we need to put these numbers together with other data:

• Hospitalization and death ("case-fatality") rates. It would be useful to know how many are hospitalized in each phase, since the greatest concern is about a likely shortage of intensive-care-unit (ICU) hospital beds, ventilators and respirators. New York State reportedly (as of the Governor's press conference on March 21) has only 3,000 ICUs, 80 percent of which are occupied. It will need at a minimum twelve times that number based on the experience in Italy and other countries. A survey of more than 200 U.S. cities by the U.S. Conference of Mayors shows great concern about running out of supplies of masks and ventilators. The cities need collectively 28 million surgical (N95) masks, 8 million test kits and 139,000 ventilators. Reminds me of a play by Shaw that I first saw at the Abbey Theater in Dublin, The Doctor's Dilemma; read it here free–https://www.gutenberg.org/files/5070/5070-h/5070-h.htm.
• Names of those who have developed immunity. This could be the base for treatments that could save lives and slow spread. Dr. David Posnett says: "If we only knew who had developed immunity to the virus.  Immunity may occur in someone who had the virus (either with symptoms or without), got better and developed IgM and IgG antibodies.  We know that happens.  If you are declared immune, you can safely go back to work which might help the economy.  You are safe as a healthcare worker.  You are safe to go buy groceries. You are safe to be around your loved ones.  You could donate plasma at the local Blood center and plasma with lots of antibodies could be administered to patients dying in the ICU (passive immunotherapy used previously against the Spanish flu and against Ebola for example)." 

STATE AND LOCAL FINANCE | Critical Federal Reforms Needed

Whether Obama or McCain gets elected on Tuesday, an early issue for the new president is the fiscal crisis facing state and local governments. Beleaguered officials have watched July-September revenues come in lower than expected while financial markets have become more risk-averse. They have been trooping to the Congress already - expect them to start pressing the President-elect after the election.

The fact is, the Federal Government is the only one of America's 87,500 governmental units that can print money. A Federal response could be to provide short-term fiscal assistance in exchange for commitment for structural changes that will bring state and local revenues and expenses into balance and will bring debt service below a reasonable ratio to a multi-year average of tax revenues.

It's not just that states and localities have seen revenues decline. Many pension funds that have invested heavily in equities and appeared to have adequate funds to pay pension obligations now look grossly underfunded. The loss in value of pension-fund assets invites further questions about pension-fund accounting. In many cases the answers to these questions will distress pensioners, taxayers and investors in municipal debt. When sorrows come, they come not single spies, but in battalions.

In New York State, Gov. David Paterson has a clear understanding of New York State's fiscal outlook. He has just raised his forecast of the budget gap facing the state this fiscal year to $1.5 billion from the $1.2 billion the state projected weeks ago. States and localities are not permitted to run deficits, so Gov. Paterson has asked the state legislature to meet Nov. 18 to close the budget with decisions that will raise more revenue and cut spending. He says nothing will be off the table and he sounds as though he means it.

New York State's problem is huge and gets worse next year and the year after. Borrowing to fund current deficits faces (appropriate) legal obstacles and would be a hard sell. Muni markets are opening up again, but with the loss of credibility of the mni bond insurers, rates are higher.

The only options seem to be to cut budgeted expenses or raise taxes. California is in a similar bind and, despite budget cuts made earlier this year, more than 20 states have identified budget gaps that combine to exceed $11 billion.

The U.S. Treasury is an attractive option for budget-closing loans. States and localities cannot run deficits but Washington can. State and local officials and their Congressional allies can argue that their problems stem from failures of Federal regulation of financial markets and that if banks can be bailed out, why shouldn't Washington provide short-term help to state and local governments?

I imagine the National Governors Association and the U.S. Conference of Mayors are working hard on this question right now.

Washington's challenge - Obama's or McCain's challenge - will be to respond in such a way that the short-term pain of state and local fiscal adjustments is reduced while changes in long-term fiscal practices are made. Federal crisis assistance to state and local governments should come with conditions that are as thought-through and as tough as new regulations being prepared for the financial sector.

Subprime Loan Maps

Subprime Loan Maps. Here's a useful new service from the Federal Reserve Bank of New York. The Fed is now offering dynamic interactive maps showing conditions and density of owner-occupied subprime mortgage loans for all U.S. states, counties and zip codes. The maps are based on data for subprime mortgage loans, based on the grade assigned to the security. The underlying data start December 2007. A dozen separate functions are available, such as loans per 1000 housing units, foreclosures per 1000 housing units, REOs per 1000 housing units. Comment by CityEconomist: This is part of what the U.S. Conference of Mayors asked the Mortgage Bankers Association for at their recent Detroit meeting, i.e., a way to estimate what the impact of foreclosures might be in every neighborhood.