Top 5 Blog Entries of the Libertarian Jew for 2020

2020 has been a crazy year. We had the worst pandemic since the Spanish Flu. We are experiencing the worst economic downturn since the Great Depression. Social unrest and political polarization have not been this tumultuous since "who knows when." The U.S. presidential elections were an absolute circus. In future years, 2020 is going to be the year we would like to forget, but we will end up remembering not-so-fondly. As I look back on the year, I look at the good, bad, and the ugly in my personal life. I also look back at my blogging for 2020. Here are five of my favorites: 

1. Cancel Culture and J.K. Rowling's Remarks About Transgenderism & Biological Sex. How do we deal with people whose viewpoints or opinions we find disagreeable? I explored this question after J.K. Rowling made comments that "sex is real," a comment that resulted in accusing Rowling of transphobia. After providing nuance in the world of transgenderism, I segue over to criticizing cancel culture and how cancel culture is toxic for society as a whole. 

2. Why We Need to Start Lifting Coronavirus Lockdowns Sooner Rather Than Later. About a month-and-a-half after the lockdowns commenced in March, I got fed up enough where I decided to write a list of thirteen reasons and considerations for why we needed to gradually lift restrictions. In early May when I wrote this, I called for a balanced approach and using standard risk management to figure out how the best way to navigate the pandemic. It's sad to see how much fear superseded logic in the proceeding months. 

3. A Sukkot Lesson on Schach and Being Comfortable with the Uncomfortable. While the pandemic has come with a lot of negative aspects, I did find myself growing spiritually. During the Jewish harvest festival of Sukkot, I looked at some of the architectural technicalities of the sukkah (temporary dwelling) and reflected on how to develop equanimity during tough times. 

4. The Smithsonian's Take on "White Culture" Begs the Question: When Does "Wokeness" Start to Resemble Racism? Martin Luther King, Jr. believed that we should judge people not by the color of their skin, but their content of their character. It's amazing how certain parts of society have devolved from that ideal. This past summer, the Smithsonian published an infographic outlining "whiteness" and "white culture" in an offensive form of stereotyping. I first delve into why over-generalizing an entire race is problematic, both factually and morally. Afterwards, I ponder where the line is between improving racial justice and becoming so obsessed with race that one's thoughts, words, and actions ressemble or parallel that of bona fide racists. 

5. Reflecting on My 1,000th Blog Entry and Why I'm Still a Libertarian, Pandemic or Not. Time flies when you are having fun, and my blogging has been no exception. It took over ten years, but I reached the milestone of writing 1,000 blog entries. I took the time to reflect on how I became libertarian. I then outlined the values-based (i.e., why I find it morally compelling) and outcomes-based reasons (i.e., why a look at empirical evidence led me to conclude that the private sector generally outperforms the public sector) as to why I adhere to libertarianism. I finally illustrate why a pandemic did not deter me from being libertarian, and if anything, why it strengthened my libertarianism. 

Shutting Down Gyms and Restaurants: Discussing Burden of Proof and COVID Risk Assessment with Limited Evidence

It has been a very trying year as we all get through this pandemic. After enduring a spring of lockdowns, establishments increasingly started to open. Navigating regulations and safety protocols has been difficult for many businesses as they struggle to comply while still generating enough necessary profits to remain in business. For those who have been in favor of lockdowns and a more restrictive approach generally, their mantra has been "Listen to the science!" We can get into whether the restrictionists are legitimately concerned about evidence-based practice or whether it is a guise to amass more power and control. I can say that I have expressed concerns about coronavirus-related restrictions not being empirically-based since I criticized the lockdowns last May. 

For those who thinks that being libertarian automatically means "have everything open during the pandemic," it really does not. For one, I called for a limited face mask mandate. I also was okay with a subsidy to pay for people to take the vaccine, provided that a) it is proven to be safe, and b) there is compelling case to be made to ensure that enough people will take it to create herd immunity. At the same time, I looked at the evidence for school closures in July and found it to be lacking. 

On the one hand, I am glad that many jurisdictions are treating the "shut things down" more like a dial than a switch. On the other hand, if a certain government entity is going to shut a certain type of establishment down, the burden of proof is on them to provide a conceivable set of facts that such a provision would protect the public health before disrupting the livelihood of hundreds. As the second wave has kicked in, we have seen two such establishments targeted either with more severe limits or downright shutdowns: restaurants and gyms. 

I want to see if the evidence out there merits shutting down either one or both types of establishments, but before jumping into that, a word on risk assessment in general. There is never going to be a scenario in which we eliminate risk. Why this pandemic brought about the delusion in many thinking we could is beyond me. As I will bring up again shortly, costs need to be weighed against their benefits. We know that contamination through surfaces is unlikely, and COVID-19 is most commonly spread by respiratory droplets. 

This has a few implications when assessing risk. One is that being outdoors is safer than being indoors because of how bacteria and viruses dilute and decay much more rapidly outdoors. The second is that social distance less likely spreads COVID-19 than being right next to someone else. The third is that larger gatherings are more likely to spread COVID-19 than smaller gatherings (and certainly smaller than being by oneself). There are more factors, but these are the main ones that help us determine the likelihood in which COVID-19 is transmitted to others. If I had to make an educated guess based on these factors, I would guess that gyms and indoor restaurants would fall somewhere on the range of "Medium Risk."

This side-conversation about restaurants and gyms is important since gyms and restaurants are more commonly indoors, not to mention that there can be multiple people together in what arguably could be construed as adequately close enough for major spreading. This gets even more important as winter weather kicks in, which means that outdoor gym classes or dining become less viable of options. Even if we did not have studies explicitly covering the specific topics at hand, we could at least see other past epidemiological studies to make an educated guess. However, since there are at least a few studies out there, I would like to see whether gyms and restaurants are such super-spreaders that we should be shutting them down as we get through this second wave. 

Are Gyms Major Spreaders of COVID-19?

Gyms did not exactly have a reputation of being a haven of sanitation pre-pandemic. At the same time, we already pointed out that COVID-19 is not commonly transmitted by other surfaces. Intuitively, whether gyms are super-spreaders largely depends on such factors as ability to space out the machines and treadmills, ventilation and airflow, face mask compliance, whether group classes are halted (see South Korea study here), local infection rate, and protocols on checking members for symptoms. As an epidemiologist from Arizona University, Saskia Popescu, put it, "it is hard to put them [all gyms] into a single box."

There was one study from MXMetrics based on 49 million gym check-ins that showed a 0.0023 percent likelihood of contracting COVID-19 from the gym, but it was commissioned by a sports club association. Another study that is to be released by Oregon University in the near future looked at gym usage in the state of Colorado. While they did not find a statistically significant correlation between weekly gym usage and weekly incidence of COVID-19, they also did not conclude that gyms are safe. At the end of its press release, Oregon University discussed safety procedures that it could use to minimize spread of COVID-19. Additionally, a November study coming from Norway found that provided there are good hygiene and physical distancing measures, gyms and training facilities do not provide additional risk (Helsingen et al., 2020).

What About Restaurants?

This is a good question, especially given scant data. An oft-cited CDC study is a limited study in Guangzhou, China saying that substandard ventilation is more likely to spread COVID-19, but that study had no scientific controls (Lu et al., 2020). There have been other similarly limited studies with similar results, but because they are so limited, it tells us next to nothing. Not many jurisdictions release such granular data. Even so, we do know, for example, that in New York State, 1.4 percent of cases were caused by restaurants and bars (compared to the 73.8 percent from private social gatherings). Similarly, the state of Minnesota found that since June, only 1.7 percent of COVID-19 cases were associated with restaurants.

One study I found helpful is from Stanford University, in which it shows that targeted efforts (e.g., capacity limits) are more effective than blanket closures (Chang et al., 2020).

Postscript

The limited evidence base that currently exists has not proven that gyms or restaurants are super-spreaders. How do we move forward? Do we err on the side of caution by shutting things down or do we allow restaurants and gyms stay open with such protocols as capacity limits, social distancing, and checking for symptoms before entering? I could ask how well lockdowns generally have worked (another discussion for another time), but I can say that restaurants and gyms across the country have been implementing protocols to make it safer, even if those vary from state to state or city to city. No activity is 100 percent free from risk, and that includes staying at home all the time.

Let's remember that when people solely focus on the risk for contracting COVID-19, they are only asking about one important part of the equation. I'm not here to diminish contracting COVID-19. I myself have already had it. At the same time, it does not paint the full picture. Extolling and playing up the benefits while ignoring or downplaying everything else is incomplete at the least, if not downright deceptive. It does not get into the benefits of keeping the establishments open (e.g., gyms keep people healthier) or the costs of keeping the businesses closed (e.g., how unemployment adversely affects finances or increases depression and suicidal ideation). Especially since we are almost a year into this pandemic, the government should show with evidence how keeping gyms and restaurants are harming public health before they needlessly go harming the livelihoods, and by extension, the quality of life, of thousands upon thousands of Americans.

Aside from each establishment having different levels of protocol, we each have our own level of risk. An 85-year-old with asthma is going to have a different risk tolerance than a healthy twenty-something. In the case of gyms, it is safe to assume that healthier people are going to the gym (especially now) than those who have conditions that could make them likelier candidates for contracting COVID-19. Even in a pandemic, we should not have one-size-fits-all solutions, but have the ability to voluntarily make our own decisions based on evidence and our own risks. 

7 Reasons Why the National Debt Still Matters (Even in a Pandemic)

For many, the year 2020 has been the worst year either in recent memory or in one's entire life. If the pandemic or recession were not enough, the United States government decided to accrue a ton of debt. Between March and October, the Treasury borrowed $3.5 trillion. Yes, that is trillion with a "t"! By the end of the calendar year, the debt-to-GDP ratio is expected to increase to 98 percent (Congressional Budget Office [CBO]). 

Tangentially, a school of thought that has gained more traction over time is Modern Monetary Theory (MMT), which essentially says that because the government has a de facto monopolistic power to create currency and bond investors have been lending at lower rates, the debt does not matter. Aside from being a departure from mainstream macroeconomics (as is exhibited by a survey of economists conducted by the University of Chicago showing that MMT is bollocks), MMT would have serious policy implications, mainly that one could continue to print currency until the end of time. A less extreme, more convincing argument than MMT is that in spite of the rising debt-to-GDP ratio, it is less costly [as a percentage of GDP] to service debt. 

Even if the debt servicing burden projects play out, there are still a number of reasons that we should still be worried about U.S. government debt:

1. Interest payments to go up from here. Part of what makes MMT so tenuous is that it assumes that interest rates (and by extension, the cost of burdening debt) stays low. According to the CBO's long-term projections, that is not expected to be the case. In the next decade, interest payments will increase from $376B in 2019 to $807B in 2029. In terms of percent of GDP, it is projected to be 2.2% in 2030 and 8.1% in 2050. There has been substantial academic literature to illustrate that there is a high correlation between rising debt and rising interest rates (Huntley, 2014).

2. Lower non-interest spending. If the government is spending more money servicing debt, that means less money on other public services (e.g., healthcare, education). Debt is the thing that holds back the ability to make better investments in the future. It also makes it more difficult to manage such future crises as wars, natural disasters, and recession (Romer and Romer, 2019).

3. Growing elderly population. As Baby Boomers retire, it will have an adverse effect on the debt, particularly when it comes to the worker-to-retiree ratio. This ratio is expected to decrease from 2.8 in 2020 to 2.2 in 2040. What happens when the elderly become a higher percentage of the population? For one, there will be fewer workers [as a percentage] contributing tax revenue dollars. This also means that there will be further strain on Medicare, Medicaid, and Social Security, which, by the way, are the largest drivers of the federal budget.

4. Increased U.S. public debt stymies economic growth. Based on 2019 projections, reducing debt would increase GNP per person by $5,500 in 30 years (CBO). Similarly, the International Monetary Fund [IMF] found that high debt hampers economic growth by "increasing uncertainty over future taxation, crowding out private investment, and weakening a country's resilience to shocks" (Gupta et al., 2015, p. 7).

5. Look at those trust funds! As a result of the pandemic, major trust funds are to go broke earlier than anticipated: Social Security in 2031, Medicare [Part A] in 2024, and the Social Security Disability Fund in 2026. This only serves to accelerate and exacerbate debt projections. 

6. Increased debt means lower savings and investment. A 2014 CBO paper found that an increase of $1 in the budget deficit translates into a reduction of national savings by 57 cents, as well as domestic investment by 33 cents. 

7. The U.S. debt trajectory. Shortly before the pandemic, the CBO predicted that debt-to-GDP ratio will be 180 percent by 2050. The United States was one of the few developed nations facing rising debt levels pre-pandemic. Thanks to pandemic fiscal spending, that ratio went up to 195 percent (CBO). There is no sign of it slowing down because unfunded liabilities, in this case, Medicare, Medicaid, and Social Security obligations that are not backed by assets. More to the point, economists at the Brookings Institution calculated that even if interest rates remain the same, the debt-to-GDP ratio would still increase to 156 percent (Auerbach et al., 2019). 

Postscript: Is the federal debt something so urgent that if we don't deal with it right this second, we're all going to die? Nope. At the same time, the increasing national debt is like a foundation of house slowly rotting. With an aging population and no sign of federal deficits slowing, it is only getting worse and collapse without reform. To quote the Government Accountability Office (GAO) in its March 2020 report, "the longer action is delayed, the more drastic the changes will be needed to address the issue."

For more information, see analysis from the bipartisan Committee for a Responsible Fiscal Budget here and here.

Do We Need Another Round of Stimulus Checks? I Think Not.

As we approach the expiration of various provisions in the CARES Act intended to help keep millions of Americans afloat during the recession, Congress proceeds with its bipartisan back-and-forth as to what should be in the next stimulus bill. One thing I noticed missing in this round of negotiations was the one-time $1,200 stimulus checks for individuals ($2,400 for married couples). This was unusual considering how much President Trump was clamoring for it earlier this year. Rather than delve into the politics, I prefer to examine the policy aspect.    

The premise behind a stimulus check is based in Keynesian economic theory. Essentially, the government sends its populace money. That money burns a hole in their pockets, so to speak. The increase in disposable income is sent to incentivize consumption, which in turn drives revenue increases at retailers, manufacturers, and other establishments. Ultimately, the stimulus checks are to translate into an economic boost. There was a secondary reason of keeping people isolated with the hopes that the pandemic would have short-term effects, but that clearly did not pan out. 

I could say there were some advantages to sending stimulus checks to people directly. One is that the process was relatively simple. If you as an individual made $75,000 or less in adjusted gross income in 2018, you received a check in the full amount. There were not income brackets or tax exemptions, which made the IRS' processing straightforward (even if imperfect). Second, because of its simple processing system, many people were able to receive the checks relatively quickly. Third, as the Peter G. Peterson Foundation mentions, the payments did go to those most financially hurt by the pandemic (see below). 

This brings me to the complaints I have about the stimulus check program. Some of those complaints are specific to the particular implementation of the last round of stimulus checks. I could complain that it was not well targeted, given the eligibility ceiling of $75,000. However, that could be rectified by changing the eligibility requirements to make sure that the funds reach those who need the money the most. 

Another complaint is with regards to improper payments. According to the Government Accountability Office (GAO), nearly $1.4 billion of those stimulus check payments (or 0.5 percent of the $292 billion spent) went to deceased individuals. The GAO discusses in its report how the IRS can improve the hypothetical next round of stimulus payments. 

My issues with the stimulus checks go beyond the implementation. As University of Chicago professor Constantine Yannelis points out, the stimulus checks do not distinguish between households and recipients, which means that it ends up being poorly targeted in terms of who needs it the most (unless you severely limited the eligibility requirements). The same thing happens with minimum wage. Because minimum wage is based on individual income (as opposed to household income), it helps out a disproportionately small percent of lower-income households. This phenomenon would explain why Yannelis calls the stimulus checks a blunt instrument. 

An even bigger point is this: if one of the main goals of stimulus checks is to spur consumption, what we should see is that most, if not all, of the stimulus payments went towards consumption. So how were the stimulus checks used? The Federal Reserve Bank of New York found that 25.9 percent of households used stimulus checks for consumer spending.

The biggest use of those stimulus checks were savings (36.4%), followed by paying off debts (34.5%). This means that the majority of the stimulus checks did not go towards consumption. A study from economists at the University of Texas, University of California-Berkley, and the University of Chicago had similar results (Coibion et al., 2020). Not only did these economists find that only 15 percent of households spend, those who did spend only used 40 percent of the check on average to spend. Those who were more likely to spend were those without work, lived in larger households, faced liquidity issues, and/or were less educated. 

This leads to the question of whether the consumption that did take place result in a boost in the economy. According to the Congressional Budget Office's September 2020 report on pandemic legislation, there was an annual percent change in GDP of 0.6 percent. At the same time, this was almost half of the effect that enhanced unemployment compensation had (see below). 

The fact that the stimulus checks fail at one of its most basic goals does not surprise me. I take a look at the Great Recession, the only other time in U.S. history where we really had this magnitude of stimulus checks, and see what happened. An economist at Stanford University not only found that the 2008 stimulus checks did little to boost aggregate demand, but also that consumption proceeded to decline in proceeding months (Taylor, 2018). Cash for Clunkers, which was a similar indirect transfer program during the Great Recession, shows similar failures in boosting long-term consumption (Hoekstra et al., 2014; Gayer and Parker, 2013).

And then there's the research on stimulus more generally. An economist at the University of California-San Diego investigated the effectiveness of government spending in response to recessions (Ramey, 2018). She concluded that the multiplier effect typically ranges between 0.6 and 1.0 (see graph below), or in layman's terms: government stimulus spending in response to recessions typically remains ineffective.  

Source: Heritage Foundation

To make the matter worse, a high debt-to-GDP ratio erodes the multiplier effect even further. This is important considering that the United States' debt-to-GDP ratio is expected to reach 98 by the end of the year (Congressional Budget Office). Some other countries have had a zero multiplier effect (e.g., Huidrom et al., 2019; Auerbach and Gordonichenko, 2012) where as some countries have been found to have had a negative multiplier effect (e.g., Ilzetzki et al., 2012). Why is this the case? Because when a country faces a high level of debt and spend a lot, a fiscal contraction is pending to compensate for managing the debts. Since such adjustments are anticipated, there have been times where the short-term consumption gets largely offset. Macroeconomically speaking, what we see is that government stimulus does not produce desired multiplier effects and that more specifically, stimulus checks do not produce the desired boom in consumption. 

Postscript

Thankfully, there is light at the end of the tunnel. The findings with the Pfizer and Moderna vaccines are quite encouraging. The United Kingdom already approved an emergency use authorization for the Pfizer vaccine. If all goes accordingly, it looks like we can start head back to normalcy around mid-2021. In the meantime, we have another six to seven months to go. We need something to hold us over in the meantime, and direct stimulus checks do not seem to do the trick. It is not simply for the multiple, aforementioned reasons. 

While there is a demand shock component to this recession, there is also a major supply shock element, which is contrary to past recessions that have primarily been due to demand-side shocks. Even assuming the shocks to supply and demand are equal, there is nothing that stimulus checks can do to mitigate the supply shock. To help with the supply shock, businesses need the equipment to operate safely. What else would help is widespread testing, which is something I have said since early April. Making sure that businesses have personal protective equipment and have the support to implement proper safety measures is what we need. I won't say that another round of stimulus checks is like flushing money down the toilet, but it is safe to say that there are better ways we could spend and target money to get through the rest of this ordeal. 

Forgiving Student Loans Is a Regressive, Sorry Excuse for Economic Stimulus

While we are climbing out of this recession at a quicker rate than was initially projected, we still have a ways to go before we experience an economic recovery. In response, President-Elect Joe Biden and a number of prominent Democratic politicians have proposed cancelling some or all of student debt. The latest argument from proponents of student loan cancellation is that it would help provide economic relief to those who hold student debt. 

The first problem with using student debt cancellation as an economic stimulus is the regressive nature of the policy. As the Left-leaning Urban Institute points out, those who are most likely to own education debt are higher-income households. The Left-leaning People's Policy Project also found that the top quintile holds $3 in student debt for every $1 that the lowest quintile holds. 

Survey data from Pew Research shows that those who are struggling with employment as a result of the recession are the ones that are least likely to have student loans. As data from the centrist Brookings Institution show, nearly three-quarters of student loan payments are made by those in the top two quintiles. This further illustrates that those who are most likely to have student loans are most likely to pay back the loans (more on that momentarily). In its July 2020 analysis, the Urban Institute also found that student loan forgiveness "would direct the most benefits to higher-income households."

Second, student loan forgiveness would not really contribute to the economy. The bipartisan Committee for a Responsible Federal Budget [CRFB] calculated that the multiplier (or to put the macroeconomics in layman's terms, the "bang for your buck") is 0.08-0.23, which is much lower than other forms of economic relief implemented in this pandemic (see below). If all of the $1.5 trillion were cancelled, it would mean $90 billion or less in cash available. Why? It would relieve them of the monthly payment, as opposed to giving someone a lump sum amount of cash. Since the typical monthly loan payment is $200-300 (Federal Reserve), it would provide little spendable cash. 

Aside from not providing a real boost to the economy, here are some other issues to take with student loan forgiveness:

1. Three quarters of Americans do not hold a Bachelor's degree. Is it fair to ask someone who has not acquired that level of education to pay for someone who did? Is it fair to those who either avoided debt or paid off debt? This proposal is more unfair considering that those with a Bachelor's degree earn an extra $400,000 in lifetime earnings in comparison to those with only a high school degree (College Board). 
2. As I brought up in my analysis on student loan forgiveness last year, those who are most likely to have difficulties with paying student loans are not necessarily the ones with the largest loans. Those who most likely default are those who drop out and struggle to find a job to pay off the debt (see 2015 article from New York Times here). 
3. Student loan forgiveness misdiagnoses the problem. The single largest factor that has driven up college tuition has been federal subsidies of student loans. The Federal Reserve of New York found that for every dollar in federal subsidies, tuition increased by 60 cents (Lucca et al., 2017). A study from Harvard University concluded that higher education programs receiving federal aid experienced higher tuition hikes than those who did not (Cellini and Goldin, 2012). And here is a Mercatus Center study highlighting the research showing how federal subsidies have exacerbated tuition prices.
4. This would set a bad precedent, which is also known as moral hazard. If current borrowers get their loans cancelled, why wouldn't future borrowers ask for a loan cancellation? This would only serve to jack up tuition prices.
5. According to Federal Reserve Bank of New York labor market data, 33 percent of those with a Bachelor's degree work in jobs not requiring a Bachelor's degree (43.2 percent for recent graduates). How does forgiving student loans solve this issue?

In short, student loan forgiveness is regressive, inequitable, and a poorly targeted form of economic stimulus. I hope that the upcoming Congress does not perform the folly of forgiving these loans.

7 Reasons Why Deutsche Bank's Remote Work Tax Proposal Makes No Sense

As a libertarian, I have spent a fair amount of time criticizing and scrutinizing bad ideas that come from politicians and other government officials in the hopes of "making government great again." From time to time, these bad ideas come from the private sector. Enter Deutsche Bank. Last week, the multinational investment bank Deutsche Bank released a research brief called What We Must Do to Rebuild. Within this brief was a proposal for a five-percent work-from-home tax. 

Why is Deutsche Bank so eager to implement a tax on those who work remotely? From Deutsche Bank's view, working remotely is a privilege. Those who work remotely are less likely to contract COVID-19, either on their commute or in their place of employment. Part of the idea is to subsidize lower-income workers who are unable to work from home. Pandemic notwithstanding, working from home saves on such expenses as commute, lunch, work clothes, and dry cleaning. This would also imply that those who performed the related services are either out of a job or have reduced hours. Because of these benefits, Deutsche Bank argues that there should be a five-percent tax on income for each day worked at home. Deutsche Bank estimates $49 billion in annual tax revenue as a result of this tax. 

This is might sound nice and dandy, but here are some issues to take with the proposal (aside from the fact that Deutsche Bank has a lot of commercial real estate holdings and remote work would affect their bottom line):

1) Enforcement and Tracking Costs. According to Deutsche Bank's own survey data (p. 33), 96 percent of workers are not going to be working remotely every day post-pandemic. Since most people would not work remotely all the time, this means that the tax would most probably be charged on a pro rata basis. HR departments would have to track when employees are in the office and when they are not for tax purposes. Additionally, they would need to distinguish when they are working remotely and when they are out of the office for something such as a business trip or an on-site visit. As the Tax Foundation points out, this complicates matters for those with performance- or project-based elements to their compensation package. 

2) More complicated tax code. These complications are not only an issue for those collecting the labor data. It would make tax collection and enforcement more complicated, which could lead to greater tax fraud and evasion. If there really is a correlation between income bracket and remote working, you could simply alter current income tax rates to compensate or make similar adjustments to the current tax code. 

3) We already have a tax system to help the poor. Our taxation system is a progressive one, which means that it is designed to help the poor. More to the point, we already have general taxes that are used or could be used to fund welfare benefits or wage supplements to deal with the short-term labor displacement. 

4) Would it really help the poor? If the wealth transfer translates into a $1,500 a month check for lower-income workers, it would be likely that employers would adjust by offering lower wages. After all, we see such behavior in minimum wage, payroll taxes, or other labor laws in which the tax incidence ultimately falls on the worker. In net, the effect for low-wage workers might not be that much. 

5) Does working from home really mean less spending? One of the concerns of the Deutsche Bank is that people will spend less because they are working home. First of all, if that is the case, what is the issue with increased savings, especially in a society that had a lower savings rate pre-pandemic (Federal Reserve)? Also, it is perfectly reasonable to assume that the demand is allocative, which is to say that people could simply spend their disposable income elsewhere.   

6) Labor rigidities and assessing costs of remote working. Much like everything else, there are costs and benefits to everything. The Deutsche Bank report seems to be dismissive by asserting that the costs are low. Aside from dealing with potential child care, here are a few: paying for one's remote work setting, increased utility bills, having to be one's own computer technician, increased social isolation, and smaller likelihood of having one's work noticed for promotional potential. As Deutsche Bank survey data showed (see above), most will not work remotely completely, assumedly to balance the pros and cons of remote working. Instead of using the tax code to incentivize a one-size-fits-all solution, employees and employers should have the ability to determine how much they work from home based on their circumstances.

7) Why disincentivize remote work? Generally speaking, taxation has two general purposes. One is to collect revenue. The second is to disincentivize behavior. In this case, the behavior that is being disincentivized is remote working. Remote working is not hurting society or even the government. The tax de facto acts as a punishment on remote working, a trend that has been taking place within the past decade and was accelerated as a result of the pandemic. This makes even less sense when considering that productivity and job satisfaction have overall increased as a result of increased remote work. There is no compelling reason to incentivize people to work in brick-and-mortar establishments. 

A remote work tax is similar to proposing a tax on people who recycle or decide to life healthily. If anything, there is a stronger argument for subsidizing it (not that I am in favor of this proposal per se) since less commuting would be better for the environment. There is a reason why there is no wide public interest in a remote work tax: a remote work tax truly is a solution in search of a problem.  

Why More States Should Legalize Sports Betting: A Look at Maryland and South Dakota Ballot Initiatives

With a pandemic, recession, social unrest, and a presidential election dominating the news cycle, you would think there would be little room for much else. And yet, there is some space for sports betting. As of August 2020, 19 states have legalized sports betting since the Supreme Court ruled that sports betting should not be under the purview of the federal government (Murphy v. NCAA, 2018). This Tuesday, there are two states that are voting on ballot initiatives to be added to the list of states that legalize sports betting: Maryland and South Dakota. South Dakota is deciding whether to allow for sports betting within the limits of the town of Deadwood, which houses a casino and is near Mount Rushmore. The net municipal proceeds would go to the Deadwood Historic Restoration and Preservation Fund. In Maryland, the state revenue funds generated are intended to go to fund public education. In both cases, the ballot initiatives bring up the question of whether we should legalize sports betting. 

Revenue and Jobs Generation: One of the obvious benefits is the money that sports betting generates. In May 2017, Oxford Economics released a report saying that legalizing sports betting in the United States would add anywhere between $11.6 billion and $14.2 billion to the United States GDP. Oxford Economics also found that it could generate 86,819 jobs directly, as well 129,852 indirect jobs. Keep in mind that would be the case if the entire country legalized sports betting. The state of Maryland's legislative analyst estimated that a 20 percent table games tax rate would translate into $18.2 million of tax revenue for the state of Maryland. While there is greater economic potential in the private sector, the Tax Policy Center warns of the limits of counting on sports betting being a cash-cow, especially given how sports betting operates and is taxed (Auxier, 2019).

Issues of Underground Markets and Exploitation: Whether it has been marijuana, prostitution, or human organ sales, there is a major concern of what happens when you drive something to the underground market. For one, the legal economy is deprived of the revenue generated from that commerce. This is important, especially considering that sports betting is a $155 billion market [in 2017 dollars], 97 percent of which was generated illegally in underground markets, as of 2017 (Reason Foundation). It is clear that sports betting, regardless of its legal status, is a desired trade. Second, underground markets lead to abuse of power and empower criminals. We see this when pimps abuse their prostitutes, drug lords are able to carry out unspeakable acts, or when a dysfunctional immigration that keeps workers undocumented, which not only keeps their potential in the labor down, but also leaves them open to exploitation in the workplace. In the case of sports betting, keeping sports betting illegal empowers bookies. Keeping sports betting illegal drives people into the arms of the criminal underworld. 

Is Gambling Addiction a Concern with Legalization?: This is one of the main concerns of those who are against sports betting. Their theory is that if we legalize sports betting, this will increasing the amount of gambling addiction. A 2016 study from the National Institutes from Health sheds some light on the matter (Welte et al., 2016). The NIH study looks to see if an increased amount of gambling legalization and availability of gambling options increased the rates of gambling addiction and problem gambling. Interestingly enough, these rates remained stable with increased legalization. The best explanation for that is because the ubiquitous nature of the black market makes gambling easily accessible. This is yet another reason to legalize. Instead of stigmatizing gambling addictions related to sports betting, legalization would bring it to light in a way that would help those who need it. Making sports betting doesn't make the gambling problems go away. It sweeps them under the rug while adding on other problems that come with the underground markets. 

Conclusion: It makes very little to no sense to keep sports betting illegal. As has already been proven, people will find a way to partake if they want, whether it is by going underground or crossing state lines to a place where it is already legal. Legalizing sports betting is shown not to increase gambling rates, and keeping it illegal is not shown to make gambling addiction go away. Even better, legalizing sports betting does not make game fixing more likely (Morris and Bentley, 2017). Legalizing sports betting helps to keep power away from those operating activities while generating revenue for both the government and the economy at large. If you live in Maryland or South Dakota, please vote "yes" to legalize sports betting.  

California Proposition 25: Should Cash Bail Be Replaced with Risk Assessment Tools?

The right to a pretrial bail is so old that it predates the Magna Carta. It is a right that is also protected in the United States Constitution under the Due Process clause (United States v. Salerno, 1987). This upcoming November, the state of California is voting on Proposition 25 in the hopes of doing away with cash bail. Back in 2018, the California legislature passed legislation on replacing cash bail with an algorithm-based risk assessment to determine whether the suspect is a flight risk enough to be incarcerated pretrial. This assessment would result in certain monitoring conditions throughout the trial. Unsurprisingly, the bail industry filed a veto referendum to dispute SB 10. If Proposition 25 passes, then cash bail will be a thing in the past. Here's what I am wondering: if pretrial bail has been such an enshrined right historically, why take issue with it? 

The purpose of cash bail is to provide an incentive for those who are released pretrial to appear for their court dates. For those in favor of Proposition 25, there is the criticism that the cash bail system does not judge an individual based on an actual flight risk. Those who fare better in the cash bail system are those who are wealthier. Most who are wealthy can afford bail with little to no impediment. As for those who are poorer, they are forced to pay a disproportionately large amount of cash to work and be with their family as they await trail, regardless of whether they are minimal flight risk. On top of that, it entails giving the bail companies a nonrefundable premium worth 10 percent of the bail (e.g., a $50,000 bail means losing out on $5,000). For those who cannot afford to pay, they stay in jail. Not only are they deprived of working in while awaiting trial, but those who are stuck in jail are often forced to accept harsher plea deals than those who can fight the charges unincarcerated (Donnelly, 2018).

This brings us to the cost of the California bail system. As of 2014, 62 percent of prison beds (or about 50,000 beds) in California were filled with those awaiting trial, according to the Public Policy Institute of California [PPIC]. A Human Rights Watch report uses an estimate that the daily cost per prisoner is $113.87. Assuming that cost is accurate, that would mean the daily cost of imprisoning unsentenced individuals is about $5.7 million daily (or $2.09 billion annually). If we use the daily cost nationwide of $77.67 found in a December 2018 report from the centrist Brookings Institution, that would still mean an annual cost of $1.4 billion. These calculations would assume, of course, that all the unsentenced individuals would not be incarcerated. The high-bound assumption could be why the California Legislative Analyst Office [LAO] estimated that the reduction in local jail costs would be in the high tens of millions, instead of a higher amount.

This leads to the trade-off of replacing it with a risk assessment system. The aforementioned LAO fiscal impact report estimated that a new system under Prop 25 would cost in the mid-hundreds of millions of dollars, implying that the net cost could be higher under Prop 25. The fact that the LAO does not put a dollar amount on it makes it more difficult to determine net cost. The PPIC had a similar issue of putting a price tag on Prop 25 this past August.

Many Left-leaning individuals have been for Prop 25. However, there are some on the Left (and not just the American Bail Association) that believe that Prop 25 will make matters worse. The Essie Justice Group believes that it will have an even larger, disproportionate effect on minority communities. This seems to have been the case when the state of Kentucky removed its cash bail system (Albright, 2019). New Jersey had mixed results. On the one hand, pretrial imprisonments dropped by 27 percent since it removed cash bail in 2017. On the other hand, racial disparities did not budge. The ACLU of New York released a policy brief this year on how risk assessment tools perpetuate socio-economic and racial disparities. A group of researchers, including those from Harvard and MIT, signed a letter in 2019 saying that these tools do not reduce racial disparities. 

The fact that the cash bail system de facto punishes many by throwing hundreds in jail before being tried, many of whom are low-risk, non-violent offenders, makes the idea of "innocent until proven guilty" a cruel joke or something that only applies to those who can afford it. Bail reform is needed. At the same time, one could argue that risk assessment tools perpetuate past biases of the criminal justice system. While there are issues with both the current cash bail system and risk assessment tools, I think I have a slight preference for Prop 25. I like how the Brennan Center for Justice concludes: If California votes "no," they should go back to the drawing board, get rid of cash bail, and avoid risk assessment tools. If California votes "yes," we should monitor the implementation of risk assessment tools to make sure disparities are not being perpetuated in the criminal justice system. 

2020 State Ballot Hodgepodge: Florida Minimum Wage, Illinois Income Tax Reform, California Gig Economy, and Marijuana Legalization

One of the things I enjoy most about election season is not the presidential election hullabaloo or even when you have Supreme Court justice vacancies. I personally get a kick out of the state ballot measures voted on in November. They are voluminous, they cover a wide range of topics, and they have greater impact on our lives than we can anticipate. Some of the fun ones I have covered in past years have included  single-payer healthcare, condom use in the porn industry, the right to hunt, and labels for genetically modified food. Today, I will cover minimum wage, tax reform, labor market reform, and marijuana. 

Florida Minimum Wage: Florida is looking to increase its minimum wage to $15 per hour by September 2026 (Amendment 2). The legislative branch's research arm, the Florida Office of Economic and Demographic Research (EDR) conducted a fiscal analysis of the ballot initiative. The EDR found that by 2027, it would cost the state of Florida $540 million per annum. Proponents argue that Florida needs to increase the minimum wage to account for rising costs in housing and transportation. Aside from contributing to the broader economy, the additional spending would offset the unemployment losses. 

The Congressional Budget Office (CBO) released a study on what a $15 federal minimum wage would look like. CBO found that while 1.3 million would be pulled out of poverty, the same amount of people would become unemployed. That on top of the fact that it would have a net cost of $8.1 billion. Not exactly an economic booster! Data from the last recession also found that minimum wage increases prolong recessions. Not exactly a winning policy if one of the main goals is to pull Florida out of the recession. Generally speaking, minimum wage increases such as these make it more difficult for low-skill labor to find or retain work, it is a poorly targeted policy when it comes to poverty reduction, and adversely impacts business operations. If you live in Florida, vote "No" on Amendment 2. For further analysis on Amendment 2, see the Reason Foundation's analysis here. 

Illinois "Fair" Tax: The main ballot initiative in Illinois this November is for what has been colloquially referred to as a "fair" tax. Essentially, Illinois is looking to switch its income tax from a flat tax (everyone pays the same percentage) to a graduated tax system (the richer you are, the higher percentage you pay). I covered the Illinois "fair" tax last year, but the proposed brackets are the same, so the analysis still applies. Aside from asking what constitutes as "fair when it comes to taxation, I took issue with the following:

• The tax will not close the budgeting gap.
• The tax reform does nothing to change Illinois' atrocious spending habits.
• The "fair" tax does not adequately address the issues of fairness that proponents purport.
• Illinois already has lousy tax competitiveness. Switching to a graduated tax system will simply incentivize more people to move outside of Illinois. 

Illinoisans should vote "no" on the "Illinois Allow for Graduated Income Tax Amendment." If you want more recent analysis on the ballot initiative, here is one from the Tax Foundation.

California Gig Economy: Last year, the California legislature passed Assembly Bill (AB) 5, which applied a three-factor test to determine whether a worker could be classified as an independent contractor under California law. AB 5 had considerable implications for gig workers, but especially app-based drivers (e.g., Uber, Lyft). If it passes this November, Proposition 22 would essentially reverse AB 5. I covered AB 5 last year shortly before it became law this past January. I thought AB 5 was inferior policy because a) it would cause greater unemployment, b) cost the California economy millions, c) increase costs for consumers, and d) eliminate the flexibility in hours that most app-based drivers prefer to the 9-5 work hour. 

Looking at the analysis by the California Legislative Analyst, it would create a minor boost in income tax revenue because drivers would be earning more in income. More to the point, passing Proposition 22 would "would allow the companies to charge lower fares and delivery fees. With lower prices, customers would take more rides and place more orders. This could increase the companies' profits. High profit would increase the companies' stock prices." This analysis points out that AB 5 has been hurting app-based drivers, customers, and companies that hire gig workers alike. In case you need more convincing, here are analyses from Reason Foundation and the American Action Forum. I urge Californians to vote "Yes" on Proposition 22 this November. 

Marijuana Legalization: This November, we have four states looking to legalize recreational marijuana - Arizona, Montana, New Jersey, and South Dakota. Reason Foundation provides analysis on each of these ballot initiatives. There is a reason states have been trending towards legalizing marijuana in recent years. It is because the fears and stigma surrounding marijuana have been overblown, to say the least. Colorado legalized in 2014, and it has not been anywhere near the disaster that naysayers thought it would be. Economically speaking, marijuana legalization makes sense. We're not spending millions to enforce laws (that includes policing, prosecuting, and imprisonment costs), which means we can focus on more serious crimes. There is more government revenue, which means that if government dollars can be spent, it could spent where it could do more good, instead of punishing a victimless crime. Also, we can reduce the size of the underground market. This is great not simply because it expands the legal economy, but because less commerce in the underground market gives criminals and drug lords less power. Let's continue the trend towards marijuana legalization by voting these ballots and making them the law of the land for these states. 

A Sukkot Lesson on Schach and Being Comfortable with the Uncomfortable

For a Jew, it's the most wonderful time of the year. Jews have four holidays crammed into a single month. We are currently in the middle of Sukkot (סכות). Also known as "the Festival of Tabernacles," Sukkot acts as a harvest festival. A major component of Sukkot is building a temporary dwelling called a sukkah (סוכה). As I looked up through the roof of the sukkah this year, I started to focus on the roof covering of the sukkah, referred to as schach (סכך). 

I started to think of some of the technicalities about what makes for valid schach under Jewish law. Two important details have to do with what the schach is made of (Kitzur Shulchan Aruch 134:3). It has to grow from the earth (גדולו מן הארץ) and it has do no longer be attached to the earth (תלוש). On the one hand, it is material made of this earth, implying there was nurturing and growth that was involved in the creation of the schach. At the same time, it is no longer attached to the earth. It has been uprooted from the conditions that once allowed for it to grow. 

Another important detail is that there has to be enough schach to provide more shade than sun (Kitzur Shulchan Aruch 134:5). What is interesting is that we are not completely covered under a sukkah. We need enough openings to have the sunlight come through the roof and enough where we can see the stars. Yes, we are supposed to receive some coverage, but we still leave enough openings to be exposed to nature, to the elements. 

You would think that these would only be details that a carpenter or architect would give particular meaning. I would normally find a fixation with such details as material type of the schach to be reflective of the obsession in the Orthodox world over legal minutiae that seemingly have no bearing on a spiritual experience. And this year, I was able to find spiritual meaning in them. 

I have been reading the book How to Be Comfortable with Being Uncomfortable by Ben Aldridge. Aldridge talks about his journey, which includes the exploration of Stoicism, Buddhism, and cognitive-based therapy. By discussing these approaches, Aldridge describes how he came to terms with his fears and anxieties by leaning into them. As the title suggests, he developed the mental resistance to become comfortable with the uncomfortable. 

I think the schach has a similar lesson to teach, especially if the sukkah is meant to act a metaphor for joyful living. We grow up only to have life thrust less-than-ideal situations upon us. We are uprooted from the things that make us feel comfortable: that is an inevitability in life that I discussed this past Tisha B'Av. I think this feeling has been quite notable during the pandemic. Pre-pandemic, so many people went to work and went about their day-to-day in an automatic fashion, thinking that nothing could shake their sense of stability or security. And then we got hit with the worst pandemic since the Spanish Flu, the greatest economic downturn since the Great Depression, and social unrest in the United States that has not been since the late 1960s. The uprootedness, the disorientation, things not going as we expect: this is all a part of life experience. 

If the amount of schach teaches us anything, it is that we are not meant to be sheltered from the elements. We are meant to accept the elements as part of the process. As a dear friend of mine brought up, the sunlight comes in through the cracks. Even as we protect ourselves from the elements, we have to remind ourselves vis-à-vis gratitude that there is good in our lives. 

What about when the elements get to be too much? I wrote a piece two years ago about the exemption of sitting in the sukkah when weather conditions are uncomfortable and what we could learn about adapting to bad situations. It seems contradictory that I would now write that we need to be comfortable with the uncomfortable. But if we sift through some of the details, it really is not contradictory. 

One of the interesting points about the exemption is that it is based on a subjective definition of discomfort. If we learn to become comfortable with the uncomfortable, it would not bother us as much. It means we would have a higher resilience to deal with cold weather or rain if it comes on Sukkot. 

It is also worth noting that the sukkah pushes us in multiple ways. The temporary nature of the sukkah reminds us that our lives are also temporary. We have to find joy even while knowing that we will all die one day. Many have argued over the centuries that money buys happiness. Although it might seem intuitive for that to be the case, we are meant to find spiritual joy in material simplicity. We also have to find comfort and joy in nature when we could readily enjoy the comforts of modern-day life. The fact that Sukkot does not commemorate a specific event implies that we have to push ourselves to find meaning to a situation when one is not immediately apparent.

Yes, there will be certain scenarios in which we cannot avoid going indoors for Sukkot, such as when a hurricane, whether literal or metaphorical, abruptly comes in our lives. We cannot weather everything. We are human and thus limited by our imperfections. However, if we could learn to weather a slightly colder wind or a temporary storm, it gives us more opportunities to experience a mitzvah, to experience something we otherwise would not have. If you can enjoy eating in a sukkah, saying brachot (blessings), and singing zemirot (holiday songs) regardless of what life, G-d, or Mother Nature throw at you, I would argue that is equanimity. Stoic philosopher Epictetus once said that it is not so much the external events that cause distress, but how we respond to them. If we learn to better respond to the external events, we would have fewer scenarios in which we would feel the need to go inside during Sukkot. Life is not about the comfort zone. It is about moving beyond it to grow, much like Abraham did when he left his hometown at the age of 75. Interestingly enough, the Torah does not mention anything in Abraham's life prior to him pushing himself outside of his comfort zone. To quote American author Neale Donald Walsch, "Life begins at the end of your comfort zone."

What I leave you with are some questions to think about: What makes us uncomfortable? How does the discomfort impede us in life? How do we learn how to build our resilience? How do we learn to become comfortable with the uncomfortable so we experience life more fully instead of missing out on the vast number of opportunities that life has to offer? 

מועדים לשמחה!

Let's Dismiss the Case for Court-Packing

The death of the late Justice Ruth Bader Ginsburg could very well reverberate and affect our democracy for years to come. This would not be because of the Justice's death per se, but the implications of how and when to fill the vacancy. President Trump is looking to fill that seat with another conservative justice. If the Republicans are successful, that would result in a 6-3 conservative majority on the Supreme Court. It's interesting to see both sides react. The Left thinks that a conservative grip on the judicial branch would harm the country for decades. The Right thinks that the Left is acting like a bunch of sore losers and that "it's our turn to be at the helm." Since the Democrats are unlikely to block a nomination (either before or after the presidential election), they are looking at another solution: court-packing.

The term court-packing dates back to Franklin D. Roosevelt. FDR tried passing various legislative initiatives (most notably the New Deal), but the Supreme Court struck down a number of these initiatives as unconstitutional. To deal with the frustration of his vision of government largesse, he attempted to increase the size of the Supreme Court from nine justices to fifteen justices. This has rightfully been portrayed as a political ploy and a power grab to gain influence over the judicial branch. 

Since the Democrats do not want to acquiesce power to the Right, they are looking to "pull an FDR" by packing the Court if they gain a majority in the Senate. The last Judiciary Act, passed in 1869, set the number of justices at nine. The number of justices has been adjusted on more than one occasion, so it is not as if there is not any historical precedent for changing the number of justices. Constitutionally speaking, all the Democrats would need to do is pass another Judiciary Act to modify the number of justices. The question is not so much whether the Democrats could gain enough power after the 2020 elections, but rather whether they should go down this path.

For one, the Supreme Court's popularity is at an all-time high (Gallup). If the Democrats opt for court packing, the political costs for the Democrats would be high. It could help to bolster the Republican's narrative on the Supreme Court. 

But let's think of this in terms of political calculus. After all, the call for court-packing is a political process and it would be foolish to think that the call for court-packing is about restoring "good governance." To quote the late Justice Ginsburg, "If anything, it [court-packing] would make the court look partisan. It would be that--one side saying, 'When we're in power, we're going to enlarge the number of justices, so we would have more people who would vote the way we want them to." 

As the Brennan Center for Justice, which is not exactly a conservative institution, brings up, it would be dangerous to "tamper with the mechanisms of democracy to thwart a single political figure." Since the impetus for court-packing is political in nature, you better believe that if the Democrats strike the first blow, the Republicans will retaliate with even more court-packing once they regain power. Since the Court would appear more partisan as a result of court-packing, it would end up eroding the legitimacy of the judiciary branch. 

If the Supreme Court cannot be seen as or act as a check on the other two branches, that erodes separation of powers, and ultimately the constitutional republic that was envisioned by the Founding Fathers over two centuries ago. Since the Left is concerned about such causes célèbres as the right to an abortion or the right to same-sex marriage, it seems peculiar that you would undermine the very judicial protection that has held those rights in place.

To be sure, both parties feel justified in retaliating when it comes to court nominees. The Democrats feel like they were robbed when it came to nominating Merrick Garland in 2016. The Republicans feel like they have been robbed of multiple federal court nominees, including Miguel Estrada. Let's be for real. Both parties have chucked procedural decency out the window when it was politically convenient.  Partisan politics can be summarized by saying "it's okay when we do it, but not when they do it." Harry Reid created the "nuclear option" in 2013. Senator Mitch McConnell extended the "nuclear option" to Supreme Court justices in 2017. 

Even so, court-packing is a whole different animal. At least with filibustering or holding up nominees, the judicial system was held intact. If we throw the norm against court-packing out the window, we also through our capacity at judicial review out of the window. As the Left-leaning Vox illustrates, multiple political scientists have pointed out that there have been multiple examples of court-packing by would-be or eventual autocratic countries: Hungary, Honduras, Poland, Venezuela, Argentina, Turkey. 

For those who complain about Trump bringing down the country, it seems hypocritical for various anti-Trumpers to advocate for a policy that would most likely erode democratic institutions. Those on the Left might want to retaliate in response to their animus towards Trump, but if successful, it would be one of the more myopic things to come from the Left, which is saying something given a look at the economic policies so many of them cherish.

         

Should We Pay People to Take the COVID-19 Vaccine When It Is Available?

Although it seems like the worst of the pandemic is behind us, we are far from returning to a pre-pandemic normal. Half of Americans are unlikely to eat in a restaurant with 25 percent capacity. 52 percent of Americans are uncomfortable with the idea of flying on a plane. Such individuals as Bill Gates and Canadian Prime Minister Justin Trudeau have expressed a growing opinion that life will not be back to normal until there is a vaccine. In the meantime, we will be meandering through uncertainty. 

Back in June, research from the University of Chicago suggested that it was not so much the lockdowns that caused the economic contraction, but it is people are afraid to leave their homes because they could contract COVID (Goolsbee and Syverson, 2020). If fear is what is holding people back from feeling like they could spend at pre-pandemic levels, then achieving herd immunity is one of the best ways to do that. Having a vaccine would go a long way to achieving herd immunity. 

However, there is at least one major issue with betting on a vaccine to bring us back to normalcy. According to a poll from Gallup, 35 percent of Americans would not get a free COVID vaccine if available. NBC News polling found that only 44 percent would get a vaccine. If the polling data are correct, that could present a major obstacle towards herd immunity. If we cannot get people to take the vaccine for free, perhaps we should pay them to take it. Last month, Brookings Institution fellow Robert Litan made the argument that we should pay $1,000 per person to take the vaccine. A few weeks later, conservative author and Harvard professor Gregory Mankiw endorsed the idea. 

The argument for paying people to take the vaccine comes down to two economic concepts: externalities and incentives. First, what is an externality? A positive externality is when the production or consumption of a good or service results in the benefit, often of a third party. 

Positive externalities can provide both private and social benefits. Take education as an example. The private benefit is that more education typically results in higher earnings, whereas social benefits can be others learning from your knowledge or benefitting from the services or goods rendered as a result of the education acquired. When I made the case for birth control subsidies six years ago, I argued for the subsidies based on the idea that a) the subsidies would be a positive externality, and b) the cost and overall size of government would be larger if we did not subsidize.

When looking at subsidizing people to take vaccines, we have to ask ourselves the cost of the subsidies versus the cost of inaction. Yes, if we paid 75-80 percent of the population $1,000 per person to take the vaccine, that could run upwards of $300 billion. On the other hand, look at the billions of dollars that have already been spent and Congress would love to spend if they could actually agree on something. 

Let's say that we are on board with such a price tag, realizing that $300 billion is a smaller and more desirable number than another trillion-dollar-plus stimulus package. If enough people are hesitant to take the vaccine, as polling data suggest, then an underconsumption could result in not achieving herd immunity. How do we get past this apprehension? To think of it in economic terms, an incentive could be provided. An incentive is a financial reward, usually money or a prize, to make a certain choice. While it would not guarantee a behavioral change, providing financial incentive could nudge enough people in the right direction to achieve herd immunity. To put it in layman's terms, money talks. Money could talk in this case, especially if the price to get a vaccine is right.

At least in concept, the idea of paying people to take the COVID vaccine is a good idea. To play Devil's Advocate, I will question the initial premise, mainly that the COVID vaccine is a prima facie positive externality. I don't say this because I think vaccines are bad or that because I am an anti-vaxxer. Quite the contrary! I got my flu vaccine this month. More to the point, I argued in favor of an opt-out vaccine system six years ago. What I take issue with is a rushed vaccine. 

In spite of years of vaccine research, we have yet to develop a vaccine for HIV, Hepatitis C, or the common cold. We also still have not produced a coronavirus vaccine that has passed Phase III. Let's forget those facts for a moment. There is a reality that vaccines typically take several years to produce. The current record for a vaccine is four years with the mumps vaccine. Why? Even if you want to argue that technological development has improved since then, it takes time to make sure that the vaccine is effective and does not have any long-term effects in which the cure could be worse than the disease. There are also the regulatory hurdles, not to mention the coordination, time, and resources required to produce and distribute the vaccines en masse. Adar Poonawalla, who is the CEO of the world's largest vaccine manufacturer in terms of number of vaccines produced (Serum Institute), said earlier this week that we probably will not have enough vaccines for the global population until 2024.  

Even if scientists could get past enough of these hurdles, there would still need to be convincing that the process was not rushed. You do not need to be an anti-vaxxer to be concerned about the speed at which these vaccines are being produced. If there is a convincing enough argument that the vaccines are indeed safe, I would be more inclined to support such a subsidy. Until then, I will remain skeptical of the proposal.

Exploratory Analysis on Sweden's Coronavirus Strategy: How Successful Has the Swedish Approach Been So Far?

Many on the Left, particularly Senator Bernie Sanders, laud countries such as Sweden because the "Nordic model." Forget for a moment that Sweden abandoned actual socialism in the 1990s because it had failed, that Sweden economic freedom comparable to the United States, or that Sweden has some features that are undesirable to the self-identified "democratic socialists," whether that be school choice, abolishment of the wealth tax, or the fact that Sweden deregulated significant portions of its economy in the late 1990s and early 2000s. In spite of these counterfactuals, it had been common for the Left to idolize Sweden.....at least until the pandemic began.

Once we were in full lockdown mode, Sweden received considerable derision. Why? Because Sweden did not implement a lockdown. On top of that, there was no face mask mandate. Granted, they closed down secondary and tertiary schools and gatherings exceeding fifty people, but a lot of businesses and institutions remained open while multiple countries implemented lockdowns and stay-at-home orders. Sweden largely relied on voluntary social distancing. I can understand why lockdown proponents would throw shade at Sweden. Imagine if a country proved that the goals of the lockdown could have been achieved without a lockdown. It would mean that so many of us went through lockdowns for nothing. Those who get angry at Sweden for their approach to handling COVID-19 do so because they have skin in the game. They want to know that their sacrifice was worthwhile. But enough of psycho-analyzing (at least for now). Let's answer an important question here: how successful has the Swedish model been so far?

One way to answer this question is to look at the death rates. If keeping things open like Sweden were as bad as lockdown proponents purported, Sweden would be an unfortunate outlier. However, that is not the case. Looking at John Hopkins' Coronavirus Resource Center, Sweden has a death rate of 57.05 per 100,000 people. This is certainly a higher rate than multiple countries, including its Nordic neighbors: Denmark (10.73), Finland (6.05), and Norway (4.97). On the other hand, Sweden has fared better than four European nations that locked down: Belgium (87.48), the United Kingdom (62.44), Spain (61.72), and Italy (58.64). France was not so far behind, with 45.56. Another noteworthy example is when you compare the state of New York to Sweden. Andrew Cuomo touted his work on defeating COVID-19 at the Democratic National Convention last week, although the death rate for New York is almost three times that of Sweden, at 169 per 100,000 people (Kaiser Family Foundation).

Let's take a look the raw number of COVID deaths. One Swedish model, which was inspired by the Imperial College model that got the United Kingdom to go into lockdown mode, predicted back in April that if they did not "change their evil ways" by implementing stringent social distancing measures, there would be 96,000 deaths (Gardner et al., 2020). Where are we with that?  If you look at statistics at Folkhälsomyndigheten (FOHM), which is Sweden's health ministry, the deaths are slightly over 5,800. When looking at the FOHM death data by age, you have some interesting findings:

1. Nearly 4,000 of the deaths of those who are 80 and older. About half of Sweden's COVID deaths in Sweden during its peak were in nursing homes. If I were to have any criticism about the execution of Sweden's strategy, it was the inadequate protocol at long-term care facilities at the onset of the pandemic (Stern and Klein, 2020). 
• Although elderly deaths were high in Sweden, it still was nothing in comparison when New York governor Andrew Cuomo mandated that COVID patients stay in nursing homes, thereby significantly contributing to New York's COVID deaths.
2. As we see below, COVID deaths in Sweden peaked in April, but in recent weeks, COVID deaths have come to a grinding halt (Worldometer). 
3. One study from Sweden shows that those in nursing homes in Stockholm had an average about 5 to 9 months of life remaining (Stern and Klein, 2020). While we should not minimize anyone's death, looking at it from the angle of years of life lost (YLL) due to premature mortality also should play a role in assessing Sweden's success. For example, someone who dies from COVID at age 30 would have more years of life lost to COVID than someone who is in their twilight years. About 500 of Sweden's COVID deaths come from those who are 50 and younger. This is significant because setting the initial nursing home policy aside, you see there are not that many deaths for most age demographics. 

The other scary COVID model that came from Sweden had to do with hospital capacity. This model predicted that intensive care unit [ICU] would reach 10,000 beds, well above the pre-pandemic capacity of 526 beds (Sjödin et al., 2020). Sweden was quickly able to ramp up its capacity to 1,100 ICU beds, but if we took the model seriously, Sweden would be screwed in either case. Guess what happened? Did Sweden exceed hospital capacity? Svenska Intensivvårdregistret (SIR), which is Sweden's intensive care registry, has data on COVID ICU bed usage. There was a two-day peak of 558 ICU beds in April, but it has declined considerably ever since (see SIR data below). Not only did the model exaggerate by almost twenty-fold, but Sweden still had plenty of ICU capacity left. In other words, Sweden was able to accomplish one of the lockdown's main goals without locking down, i.e., making sure that hospitals did not exceed capacity.

I would like to say a word about herd immunity. When the pandemic began, experts postulated that herd immunity would be around 60 to 70 percent. In May, an antibody study showed that Sweden only reached about 7 percent (see here), which is a far cry from 60 percent. By late July we started to see a decline in cases, hospitalization, and deaths. If it is not the antibodies, what could it be? It could be possible that T-cell immunity is contributing to herd immunity, as is implied by studies from Karolinska University in Sweden (Sekine et al., 2020) and University Hospital Tübingen in Germany (Nelde et al., 2020). Even better is that herd immunity might not be so high. One study from Science magazine calculates a possible herd immunity rate of 35 percent (Britton et al., 2020), whereas a preprint study from Oxford suggests that it could be as low as 10 to 20 percent (Aguas et al., 2020). While this evidence is preliminary, it does suggest that Sweden could be closer to herd immunity than we might realize. If Sweden did inadvertently reach herd immunity sooner than expected, it could mean that Sweden has experienced the bulk of its COVID deaths as a result. And if that is true and other countries end up going through a second wave, it means that it is too early for lockdown proponents to use death rates as a metric.

While this a pandemic, there is more to consider than the health aspect. There has also been the question of whether keeping the economy open would help Sweden. If you would have asked me at the beginning, I would have expected the Swedish economy to get pummeled along with the rest of the world. After all, Sweden is more dependent on imports, not to mention greater dependence on international demand for Swedish goods. Not even the Riksbank, which is the Swedish central bank, was that optimistic. They were predicting an annualized contraction of 6.9 percent. Yet the GDP for the first half of 2020 surprised me. Although economists were predicting a 0.6 percent contraction for Sweden in Q1, it actually grew at 0.1 percent (or an annualized rate of 0.4 percent).

Sweden did experience a contraction in Q2, but it was not nearly as bad as their European neighbors (BBC). Sweden had a quarterly decline of 8.6 percent, which was still less than half of the United Kingdom (19.1 percent) and Spain (18.5 percent). As a reminder, the United Kingdom and Spain locked down, yet they both had higher death rates and a higher economic contraction than Sweden. The European Union average was a contraction of 11.9 percent, which is also worse than that Sweden. Capital Economics found that Sweden is going to have the least shallow recession in Europe, even in comparison to its Nordic neighbors.

Since the Swedish economy did not experience economic contraction in Q1, they technically are not in a recession yet. That could change in Q3, but as of now, economic growth is faring better than other developed countries.

Unemployment figures are less encouraging. Sweden has an unemployment rate of 8.9 percent (Statistika centralbyrån [SCB]), whereas the Euro Zone average is 7.8 percent (Eurostat). While it is still higher than the Euro Zone average, it is still lower than the U.S. unemployment rate of 10.2 percent.

Postscript: Yes, the Swedish government made some clear mistakes at the beginning, most notably with long-term care facilities. But even after that rough start, Sweden seems to have gotten the virus under control. The decline in deaths, hospitalizations, and cases since its April peak has been encouraging. The GDP figures are also higher than forecasted, which is also good news. Sweden's economy seems to be faring better than its European peers.

While there is some reason for initial optimism, it is still too soon to definitely determine if Sweden's light-touch method was the correct one. Whether Sweden gets hit with a second wave will help determine if its more lax, voluntary approach was the right one. If Sweden does not get a second wave, I would most likely give Sweden a rating of B/B+ for its overall response. For Sweden's sake, I hope that it does not get a second wave.