Author: j.giglio

The threat of stagflation

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Turn on the TV, radio, social media, news sites, and podcasts and the COVID-19 virus story is topic number 1 through 100 with only the weather report offering relief. The pandemic has both disrupted and ended people’s lives.

The federal government is facing the momentous task of reversing the effects of the resulting recession with a combination of expansionary fiscal and monetary policy. On the fiscal side, rescue spending, financed with gobs of new debt, prevented further deterioration of the economy. On the monetary side, the Federal Reserve has pursued both traditional and unconventional policies.

The public debt of the United States has risen quickly over the last several months. From Feb. 20, 2020 through June 20, 2020, the government’s total public debt has increased by about $3.068 trillion from $23,409 trillion to $26,477 trillion. While the federal government has gone on a borrowing binge and approved huge relief spending, the Federal Reserve is creating huge amounts of dollars that end up paying for the debt.

Lurking behind the easing of monetary policy is the fear that too much money chasing too few goods will lead to inflation, thereby decreasing the purchasing power of the dollar. Once the crisis is over, there is the prospect of prices and inflation accelerating simultaneously, or what people of a certain age will remember as stagflation.

In other words, one potential economic consequence of deficit-financed public spending and the Federal Reserve’s emergency lending programs and interest rate cuts is the threat of inflation in a post Covid-19 economy. Among other things, inflation eats away at the purchasing power of people’s paychecks.

It also disrupts people’s behavior, causing demand-pull inflation. Suppose a rise in prices sets off rumors that prices will increase still more. This is common during inflationary times, when the increasing prices of goods lead people to expect that prices will be even higher tomorrow. People rush in, causing prices to go higher still. People buy more of a product when inflation is rampant, anticipating that the price will only rise more.

Meanwhile, firms selling the products see prices go up and decide not to take advantage of good times by increasing their offerings, but instead hold back, waiting for tomorrow. Thus demand goes up and supply goes down.

At its worst, the entire economy goes out of control, as happened in the 1970s. After several decades of unprecedented growth, signs of a slowdown emerged amid events such as sudden oil price spikes in 1973 and 1979, and increased global competition precipitated important economic changes. In the hope of inflating the economy out of unemployment, the government printed tons of money.

The economy was stuck between a rock and a hard place. Economists called the twin phenomenon of stagnating growth and double- digit inflation: “stagflation.” In 1979, President Jimmy Carter appointed Paul Volcker to chair the Federal Reserve Board. He pursued tight monetary policies, pushing interest rates over 20 percent, with the desired consequence of a steep and prolonged business recession breaking the back of runaway inflation. By 1986, inflation almost disappeared entirely.

The legendary philosopher king of baseball, Yogi Berra, allegedly once said: “It’s tough to make predictions, especially about the future.” Still, many financial mavens are fretting and speculating about the danger of price inflation resulting from money being printed at a frenetic pace in the United States. They fear the country may be entering an era of double-digit inflation similar to the 1970s and that stagflation may return to the daily lexicon.

As John Maynard Keynes wrote, “Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”

Americans can only hope that Lenin was wrong or misquoted, and they will not experience the return of stagflation. Time will tell if the inflation mongers are right.

The economy and COVID-19, Part 2

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Americans are struggling to adjust to a pandemic whose future progression is uncertain. They have not seen an economic downturn of quite such scale or scope, and people are unsure about how the United States can pull out of the crisis.

Righting the economic ship will require a delicate balance of managing debt and encouraging growth. A large infrastructure investment program that includes private contributions is a feasible way to achieve that goal.

Governments are struggling to prop up economies while confronting the serious and immediate public health challenges of COVID-19, resulting in unprecedented emergency spending and huge budget deficits throughout the world. In the United States, Congress has passed huge spending bills to help businesses and households that have swollen the national debt by about $2.4 trillion. The Congressional Budget Office numbers for its Doctor Doom scenario recently projected a budget deficit of more than $3.7 trillion for the current fiscal year.

Outstanding national debt now exceeds $25 trillion. Additional outlays in response to a second wave of COVID-19 outbreaks could further increase the debt and add to sovereign risk. Even in a low interest rate environment, higher debt service costs will crowd out other government spending. Trying to explain to the average politician that debt is a drag on future growth is a waste of time. Spending today and making a suitcase of promises is what helps them get reelected tomorrow. The future is someone else’s concern.

The Federal Reserve Bank has taken emergency measures to make credit easier to obtain with a bigger money supply and lower interest rates. Additionally, the Fed is lending more than $2 trillion to businesses and state and local governments. There is concern that the Fed’s actions risk future price inflation which would decrease the purchasing power of the dollar. The era of the dollar as the world’s primary reserve currency may also come to an end. In that case the U.S. would no longer benefit from the typical safe-haven demand from foreign investors as the value of the dollar collapses.

Policymakers note that these concerns must take a backseat to addressing the immediate crisis. The present commands their attention, but they may insufficiently appreciate that the future may be more of the present.

Going forward, the U.S. will have to manage the debt, deficits, and debt service payments, and at the same time find ways to support economic recovery to grow its way out of all this debt. While fiscal consolidation—raising taxes, cutting spending, or both—is the tried and true method for tackling debt challenges, it is likely to encounter some major tactical problems.

Raising taxes is politically difficult given the perception among many in Congress that voting for tax increases is tantamount to announcing your retirement from elective politics. Similarly, cutting high-dollar payment programs like Social Security, and Medicare is bound to be strongly opposed by legions of elderly voters.

Another approach is to focus and allocate resources to areas that create the most jobs. The time is long overdue for a bipartisan infrastructure investment package that rebuilds America’s crumbling roads and bridges, invests in future industries, and promotes increased productivity while immediately employing people whose income would give the American economy a shot in the arm. There is a broad consensus among mainstream economists that infrastructure investment has a large multiplier effect through the economy.

The problem is where the actual dollars can come from to fund such an ambitious program. One solution is to recruit private firms to help start, fund, and run as many of these infrastructure projects as possible. If properly structured, such public-private partnerships could tap into the billions of dollars in private capital hungering for low-risk investment opportunities able to offer decent rates of return.

COVID-19 has introduced a host of new economic challenges. A robust infrastructure program that includes private participation would be an effective way to begin to address them.

Strategy and the COVID-19 pandemic

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Residents and workers at U.S. nursing homes and long-term care facilities have accounted for a staggering proportion of COVID-19 deaths. The prognosis is particularly poor for elderly individuals who contract the virus. Around 80 percent of U.S. COVID-19 deaths have been among people 65 and older, according to the Centers for Disease Control and Prevention. These numbers highlight the failure of government officials to think strategically.

The disease is particularly lethal to older adults with underlying health conditions and can spread easily through facilities where many people live in a confined environment and workers move from room to room. Because of residents’ close proximity, these places are alike petri dishes for the coronavirus. At least 50,000 residents and workers have died from the virus at U.S. nursing homes and other long-term care facilities for older adults.

This figure may be understated because states differ in how they report deaths of residents in long-term facilities. For example, some do not include incidents of a resident dying in a hospital.

The lack of a national strategy to ramp up COVID-19 testing in congregate care facilities and to provide protective equipment to staff made it easier for the virus to spread in these densely populated settings. State decisions to transfer recently recovered COVID-19 patients back into long-term care facilities also increased the risk to this population. New York State, for example, mandated that nursing home facilities admit actively ill COVID-19 patients.

Despite early warnings based on fatality rates in China and Italy that people over 65 were the most vulnerable to the novel coronavirus, the national and various state strategies for dealing with the pandemic had major shortcomings.

Successful business people understand that strategy is about making choices, such as who is the target customer they wish to serve. Additionally, they understand that a firm’s resources represent the critical building blocks of a successful strategy. They determine not what an enterprise wants to do but what it can do.

Equally important, they recognize that resources are finite. Resources don’t spring full-blown out of Zeus’ forehead. Put simply, a key responsibility of leadership is to identify, build, and deploy resources in pursuit of business goals to provide value to the target customer and adjust as market conditions change.

Brand-obsessed leaders at every level of government have to be honest about clearly defining at-risk populations and allocating scarce resources to protect those people. In the case of COVID-19, that means the elderly and those with underlying conditions. For example, knowing that nursing home and long-term care residents and workers are most at risk, a targeted strategy would have allocated finite resources such as testing, protective equipment and other medical supplies to this vulnerable population.

Strategy is about making hard choices with imperfect information. Anyone running a successful enterprise understands that trade-offs matter. Leaders have to make choices about what they will do and what they will not do based on facts and the reality of limited resources. This requires them to choose carefully among available resources and sensibly allocate them to the problem at hand.

Another challenge when it comes to developing a successful strategy in a competitive environment is not to confuse means with ends. You can’t have everything at once, so your goals should be realistic and feasible, not pipe dreams. Words to live by.

You would be right to conclude that U.S. political leaders could have done a better job of protecting the seniors who are most vulnerable to the coronavirus. They were left exposed by the failure to develop an intelligent strategy. Americans can only hope those leaders have developed a realistic strategy to protect seniors if a second wave of the virus comes in the fall. It’s better to go too far than not far enough when it comes to protecting the most vulnerable in society.

President’s proposal for a payroll tax holiday

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President Trump has proposed to eliminate payroll taxes that fund Social Security and Medicare through the end of the year to provide the economy with a shot of adrenaline. The idea is to put after-tax take-home pay in the hands of people who are likely to spend it right away to help staunch the economic pain caused by the COVID-19 pandemic, but in practice it wouldn’t make much sense.

Payroll taxes include the Social Security tax, which is 12.4 percent of earned income up to a maximum of $137,700 for 2020. Employers and employees each pay half. The Medicare tax, also evenly split between employers and employees is 2.9 percent of earned income with no maximum. Married couples filing jointly who make $250,000 or more and individuals who make over $200,000, pay an additional 0.9 percent.

The payroll tax cut idea is not new. In 2011 and 2012, the Congress and President Obama reduced the employee share of the tax from 6.2 percent to 4.2 percent and filled the resulting gap in the Social Security Trust Fund with general revenues.

While Trump has fixed his sights on getting the payroll tax holiday into the next coronavirus stimulus bill, it is unclear whether he can get Republicans, much less Democrats, to go along with such a proposal. Democrats argue instead for expanded unemployment insurance and aid to state and local governments.

Congressional Republicans have also been slow to endorse the payroll tax rollback, claiming it is too early to argue what should go into the next stimulus bill. They are also concerned with adding to a budget deficit that is forecast to balloon to $3.7 trillion this fiscal year.

Cutting payroll taxes does not make sense because it would do little for the more than 40 million Americans who have applied for unemployment in the last three months, especially lower income people in industries like tourism and hospitality. If you don’t have a job, a payroll tax cut does you not good at all. Even among those who are working, such a tax cut would be highly regressive. High-income people would get far more than low-wage workers.

Cutting payroll taxes would not help business cash flow, since the CARES Act already allows many firms to defer paying payroll taxes until 2021 and 2022. Many economists say a payroll tax holiday alone isn’t enough to bolster consumer spending, a prime driver of the economy, and spur companies to begin hiring.

Supporters of Social Security and Medicare also oppose the president’s proposal. They claim any payroll tax cuts that reduce revenue flowing into the trust funds would threaten Social Security’s ability to continue paying benefits to 64 million Americans who depend on them for their economic survival. Seniors directly affected by taking their money from the trust fund will not see a dime of relief since most of them are not working.

There are alternatives to the payroll tax cut that would provide more direct economic stimulus. One way to keep workers on payrolls and help businesses stay afloat would to be expand the existing employee retention tax credit that was part of the CARES Act. This provision provides eligible employers a tax credit against employment taxes equal to half of qualified wages. There is bipartisan support to increase the credit from 50 percent to 80 percent of wages and benefits. It would be raised to cover $45,000 of wages and benefits instead of the $10,000 currently offered.

Other proposals that merit consideration, such as an infrastructure package, a tax credit to incentivize domestic manufacturing, and another round of stimulus checks to directly address the pandemic-induced economic downturn.

Hopefully the parties will overcome their ideological differences and compromise on additional injections of public resources. The downside is that acting in a fiscally responsible way may significantly affect each party’s presidential candidate. Now is not the time to prioritize election prospects over staring down a depression.

The Battle of Anacostia Flats

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History is a foreign country to many students and to far too many Americans as well. The call for using the military to quell protests in Washington, D.C. is not without historical parallel. The story of the bonus march on Washington has been ignored or forgotten by contemporary pundits.

In 1924, Congress rewarded veterans of the First World War with bonuses of a bit more than $1,000 per soldier, but they were not scheduled for full payment until 1945.

Unemployed veterans petitioned for immediate payment to alleviate the economic hardships of former servicemen who had lost their jobs in the early days of the Great Depression. In 1930, over President Hoover’s veto, the Democratic Congress voted to pay the veterans a little more than half of the amount promised. More than 20,000 veterans of the World War Expeditionary Force with their wives and children from all over the country descended on Washington in the spring and summer of 1932 and promised to stay until Congress approved legislation to pay the balance of the bonuses.

By June the veterans who styled themselves as the Bonus Expeditionary Force were camping in shacks and tents across the river from the capital and occupying vacant buildings in the city. In mid-June, the House of Representatives passed a bill that authorized the immediate payout of the bonus, but the Senate rejected the bill. President Hoover, concerned about balancing the budget, continued to oppose the veterans request. Most of the veterans returned home but an estimated 2,000 to 10,000 had nowhere to go and remained with their families to engage in protests.

Many in the Hoover administration saw the bonus marchers as a threat to national security. In mid-July, President Hoover ordered the police to clear the bonus marchers out of several abandoned federal buildings that they were occupying.

When the evictions began, several marchers threw rocks at the police, who then opened fire. Two veterans were killed and an ugly riot followed. The local authorities appealed to President Hoover for help. The violence provided him with the excuse he had been seeking to use force, and he ordered the United States Army to help police clear out the buildings.

Late in the afternoon of July 28, General Douglas MacArthur, the Army chief of staff, undertook the assignment with the assistance of his aide Dwight D. Eisenhower. He led the Third Cavalry under the command of George S. Patton, along with two infantry regiments with fixed bayonets, a machine-gun detachment, and six tanks that, for the first time in American history, drove down Pennsylvania Avenue in pursuit of the marchers. The troops used tear gas to drive the veterans out of the buildings and then through the crowded streets of the capital.

As the marchers retreated, General MacArthur exceeded his orders, just as he would do in Korea two decades later, to secure the building and contain the marchers at their camp. He pursued them to their Shantytown across the Anacostia River and ordered his troops to burn the tent city where the former servicemen and their families camped. Reportedly, 55 veterans were injured and 135 arrested.

When General MacArthur met with the press later he said: “That mob down there was a bad-looking mob. It was animated by the essence of revolution”. He sought to justify his actions by arguing that the bonus marchers were attempting to overthrow the government.

The Battle of Anacostia Flats outraged many Americans and marked the low point of President’s Hoover’s tenure. The bonus march contributed to his defeat to Franklin Roosevelt three months later and was a catalyst for social change.

In 1936, Congress finally passed, over President Roosevelt’s veto, a bill to disburse about $2 billion in bonuses. The march laid the foundation for the G. I. Bill of Rights in 1944, which provided Second World War veterans with funds for college, housing and other benefits.

The death of Hong Kong?

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Hong Kong’s reputation as an international business city may be finished. The Chinese Communist Party (CCP) is fixing to impose a sweeping national security law that bypasses Hong Kong’s own legislative process. The law would erode the city’s high degree of autonomy guaranteed under the “one country, two systems” formula.

The law would ban secession, foreign interference, terrorism and all seditious activities aimed at toppling the central government. Additionally, it is designed to “prevent, stop and punish” activities that endanger China’s national security. It also reveals plans to establish new national security agencies for the first time in Hong Kong. In sum, Hong Kong loses the rule of law and it is replaced by the rule by law with the courts, police, and prosecutors controlled by the CCP.

The smart money knew this legislation was coming. To deal with last year’s protests in Hong Kong, President Xi Jinping, the most authoritarian Chinese leader since Mao Zedong, has to show he is boss by reasserting dominance over a piece of Chinese territory.

The CCP doesn’t play softball. While the international community is facing down the Covid-19 pandemic, dealing with its economic fallout, litigating the past, and reminiscing about the future, they made their move with all the finesse of German brown shirts in the 1930s. The CCP gives less than a tinker’s damn what other countries think.

This is the latest in a series of aggressive foreign policy moves by the CCP since the outbreak of the Covid-19 pandemic, including upping its presence in contested areas of the South China Sea. The CCP is intent on China becoming the regional hegemon in Asia, just as United States has been in the Western Hemisphere since the late 19th century.

The CCP is going to do what it wants in Hong Kong without fear of the consequences. Quite apart from reigniting the pro-democracy movement, they know full well that no one in the international community is going to war over Hong Kong. Political figures around the world have decried the new national security law for Hong Kong. They argue that the new law is a “flagrant breach” of the Sino-British Joint Declaration that returned Hong Kong to China in 1997 with the understanding that Hong Kong residents would enjoy basic freedoms until 2047.

Under the agreement, Hong Kong was to be governed under the “one country, two systems” principle which was meant to guarantee a high degree of autonomy for Hong Kong for 50 years. But the international community will not stand up to China or boycott Chinese goods. With the exception of the United States, the reaction will continue to be all rhetoric and no action. It is wishful thinking to expect St. George to come to the rescue and slay the dragon in the guise of the CCP.

Legislation has been introduced in the United States Senate that would sanction CCP officials enforcing the national security laws in Hong Kong. It would also penalize banks that do business with any entity enforcing the law. Secretary of State Mike Pompeo has threatened to revoke certain economic and trade privileges Hong Kong enjoys with the United States that do not extend to China as a whole. Such an action might result in the city losing its status as a major hub for global finance.

For the other Asian countries, this move is the canary in the coal mine. They will have to fall in line and recognize China as the dominant power in the region while the rest of the international community is kept off balance as to their next move. For certain, Taiwan is in the CCP’s line of sight.

The passage of the National Security Law will be a game changer. With the passage of this law, Hong Kong will become just another Chinese city. Undercutting Hong Kong’s political autonomy and civil liberties will undermine the city’s attractiveness as an international business and economic center.

Humility and effective leadership

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It has been a busy year for death in the United States. The coronavirus killed more Americans in the last two months than died in the Vietnam War. The world has been disrupted and the collateral damage is omnipresent. Catastrophic events such as COVID-19 are hard to predict. They expose weaknesses in society and reveal the consequences of earlier bad decisions such as failing to diversify supply chains.

The pandemic has placed extraordinary demands on business and government leaders. Its scale and attendant uncertainty, unpredictability, and ambiguity make it challenging to navigate the crisis.

Crises also demonstrate that recovery is most likely under effective leaders who lead with humility, make tough decisions, tell the truth, and are able to identify and deploy resources with dispatch. Leadership matters and character is foundational to good leadership. Character refers to the distinctive qualities of an individual and, as Aristotle said character is revealed through action.

There are scores of books, articles, and studies about leadership. They often include a checklist of the characteristics that cumulatively constitute effective leadership, including vision, accountability, courage, drive, collaboration, integrity and more, many more.

One trait that receives insufficient attention is humility. If leadership has a secret sauce that may well be it, and humility seems to be in short supply today. Humility has nothing to do with being weak or indecisive. Put simply, a humble leader understands the things he or she doesn’t know, so they listen. It improves their hearing as well as helping them get smart on issues.

Successful leaders rely on the opinions and decisions of other people in times of crisis, especially when the cause of the crisis is outside their area of expertise. Effective leaders project self -confidence and authenticity when they check their egos at the door and acknowledge their failures and weaknesses. They understand the world is just too complicated for them to have all the answers.

Humility and ambition are not always at odds. Consider, for example, the case of Abraham Lincoln, who never let ego get in the way of his ambition to create an enduring union.

In contrast, consider leaders who don’t want people who say no. They are suspicious of any plan that doesn’t originate with them. You can argue with them but you must be careful how and when. You are better to give way on every possible point until the vital point, to position yourself as in need of guidance rather than appearing to believe that you know better than they do. Remember, these types of leaders want more than to be advised of their power, they want to be told they are always right. Other people commit errors or deceive them with false information. They are insecure in their insecurities.

These self-absorbed leaders who tell the truth less than half the time can’t be trusted to keep their promises, often pass off blame to others, and are especially bad at understanding and caring for people, they lack empathy. Leaders who do not have the humility to recognize their own errors and omissions will not make necessary course corrections to ensure success. Such leaders don’t catch the joke that if you think you are the smartest person in the room, you are in the wrong room and the only one who is incapable of learning.

Humility is a mindset for leaders who want to do big things in a world filled with uncertainty and ambiguity. These leaders motivate and empower those around them and listen well. As C.S. Lewis said: “Humility is not thinking less of yourself, it’s thinking of yourself less.”

A strategy for dealing with China

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On Feb. 22, 1946, George Kennan, U.S. Chief of Mission in Moscow, sent the State Department a long telegram explaining the behavior of the Soviet Union and how best to deal with it. The gist of the telegram was that the Soviets, pressed by economic failure and bound by Marxist-Leninist ideology, found a perfect enemy in the United States and were uninterested in compromise.

This being the case, the best way for the U.S. to deal with the Soviet Union was to build up the still-free countries of Western Europe and do all it could to contain Soviet expansion. This policy became known as “containment” and its immediate result was the massive aid program to post-war Western Europe known as the Marshall Plan.

A year later in, writing under the byline “X” in Foreign Affairs, Kennan expanded upon these views. He was a realist who believed international relations ought to be “guided strictly by consideration of national interest,” not treaties and alliances. While often revised, Kennan’s containment strategy would largely define U.S. policy toward the Soviet Union until the end of the Cold War.

Now, more than 70 years later, the U.S. and its allies again face a communist rival that views the United States as an adversary, seeks global influence, and wants to supplant America as the world’s dominant power. The Chinese Communist Party’s (CCP’s) challenge is generational and cuts across economic, military, political, and social spheres.

The United States is at war. Don’t be deceived because soldiers of the People’s Liberation Army, a branch of the CCP, aren’t running down the street.

While America and the world are in the grip of the made in China COVID-19 pandemic, the CCP has launched a global disinformation campaign reminiscent of the Cold War, blaming others for the spread of the virus. Equally important, it is moving at warp speed as the first major world economy to end lockdowns and start up its economy. The CCP is acting to shape the pandemic narrative and geopolitical shifts in the post-COVID 19 world.

Ever since President Nixon’s opening to China in 1972, the U.S. has largely sought constructive engagement, which would supposedly help democratize China and integrate it into the American-led international economic order. As a “responsible stakeholder” in the international system, China would be highly motivated to maintain peaceful relations with other countries.

The integration strategy has not worked. Nor has the bipartisan support for China’s admission into the World Trade Organization. Recent events confirm that China is challenging the existing international order with impunity.

Look no further than its land reclamation efforts, claiming some 80 percent of the South China Sea as its sovereign territory, challenging Japan’s administrative control of the Senkaku islands, the “One Road, One Belt” new Silk Road Eurasian integration plan, and more.

While the United States has wasted decades in its dealings with the CCP, it is still not too late and George Kennan’s notion of containment remains relevant. The United States strategy should be to preserve and deepen relationships with Asian countries fearful of China’s power and aggressiveness.

China has few allies in the region. The United States should be working closely with India, Vietnam, Japan, Philippines, Australia, Taiwan, and others to contain China, and in the process advance America’s economic, political, and security interests in the Asia Pacific region. Closely related, the U.S. should be forging relationships with developing nations across the globe to counter China’s Belt and Road Initiative.

Today, George Kennan’s prescription that “the main element of any United States policy toward the Soviet Union must be that of a long-term, patient but firm and vigilant containment of Russian expansive tendencies” offers the best hope of containing China’s ambitions. The challenge is that Americans seek instant gratification, while China plays the long game. One thing is certain: Everyone will be feeling their age before this contest is played out.

What went wrong in China ?

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The news today is totally dominated by talk of the coronavirus pandemic, with occasional relief provided by the weather report. Little effort is made to review how we got here, or what to do about it.

For decades, Western academics, policy makers, captains of industry, and politicians assumed that China’s embrace of capitalist economic policies would set the stage for democratic reform. George Orwell was right when he said: “Some ideas are so stupid that only intellectuals believe them, for no ordinary man could be such a fool.”

Put in simple terms, the theory was that economic freedoms would cause the Chinese people to begin to demand political freedom, resulting in a democracy. That has not happened in China, where the Chinese Communist Party (CCP) remains firmly in power.

China has been ruled by the CCP since 1949. The regime doesn’t tolerate political competitors. It is authoritarian, an all or nothing proposition. Its goal is to control all aspects of public and private life. It controls the army, the courts, the police, the media, and the economy.

The Chinese people are merely the state’s subjects. Just consider the CCP’s version of Soviet gulags, called reeducation centers, where up to a million Muslims have been incarcerated. Student-led pro-democracy demonstrations in Hong Kong show that millions of Chinese people want to be free of the party’s yoke.

Calling out the CCP and their role in the COVID-19 pandemic is not racist. It began in China and could have been stopped at its source. But the CCP lied about this deadly virus, which cost the rest of the world many weeks of preparation, countless lives, and forced shutdowns of the American and other world economies.

No year in recent history has brought such devastation. As of April 26, there are over 202,000 deaths around the world and over 55,000 in the United States from COVID-19, according to numbers compiled by the Johns Hopkins University. People worldwide are struggling to get comfortable with the uncomfortable realities of a new normal.

The US and other countries face a Sophie’s choice: They cannot directly attack the CCP over the pandemic and its role in triggering an unparalleled global economic and public health crisis, nor hold it accountable for the COVID-19 outbreak when the world depends upon the CCP for medical supplies and protective equipment. Name-calling and demands for reparations come out of Washington, but the harsh reality is that payback is not in the cards. The CCP’s list of transgressions may be long and shameful, but the US is dependent on them for life-saving exports.

The economic downturn is a completely artificial event and any economic rebound will depend on when the public health containment policy ends and a safe and scalable vaccine is developed. The longer pandemic containment lasts, the more parts of the economy deteriorate. Truth is, the economic pain will continue into the foreseeable future.

Congress and the White House may put together another economic relief package that they will characterize as a stimulus package similar to the CARES legislation. This is a misnomer, for much of the $2.2 trillion CARES act simply made up for lost wages; it won’t generate additional spending. Politicians in Washington will be out campaigning this summer rather than engaging in serious discussions about how to decouple essential supplies coming from China.

A modest start would be to slap “buy American” provisions on government agencies and provide tax incentives for American companies to bring back their supply chain to the US or American allies. Notions about introducing legislation to allow Americans to sue China in domestic courts to “recover damages for death, injury, and economic harm caused” by the CCP’s reckless response to the COVID-19 outbreak will simply result in the party giving the middle finger to any adverse judgments, just as they do to other international institutions.

The CCP plays by its own rules.

Lessons from the coronavirus

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The United States is in the thick of the Chinese Communist Party (CCP) virus crisis. It leads the world in the number of deaths, with reported cases in all 50 states assuming you believe the numbers coming out of the CCP. Nearly 26 million Americans have filed for unemployment benefits, which means millions of people have lost their employer-provided health insurance.

Working class Americans feel like they are living through Daniel Defoe’s Journal of the Plague Year. They are learning to live with uncertainty, constantly practicing hand hygiene and prioritizing needs from wants. The economy has come to a sudden stop, induced into a coma to deal with the public health crisis.

They are living through a disaster movie. It was business as usual until less than two months ago; now it’s business as unusual with virus precautions engulfing nearly every aspect of American life. Their lives now depend on staying home and doing nothing. A lot of thought is put into doing nothing. Even comedy is becoming tiresome – there is nothing to joke about. They are cooped up with no end in sight. It’s difficult not to be paranoid when the sky is falling and the walls of their daily existence are caving in on them and their families.

Of course, the wealthy are in a twist, grappling with the traumas of cancelled golf games and visible roots. While health care employees are working 14-hour days risking everything, Ellen DeGeneres is comparing living in her sprawling mansion to being stuck in jail.

Americans are searching for elected officials willing and able to work together and put aside their partisan bickering in the face of a national crisis. They want authority figures who do not engage in self-aggrandizement and can draw upon their experience to assuage the fears of an anxious country.

There is much Americans don’t know, and much that they think they know is probably wrong, thanks to Chinese Communist Party dissembling. It’s payback time for the globe’s fatal attraction to the CCP and dependency on foreign sources of medical supplies. It may well be that the ordinary working American will be thankful that the peak of globalization will be behind them when the country emerges from this crisis.

A key question is why the country was so utterly unprepared for this crisis. Leave it to history and to a national commission to interrogate this question. But a book published by Barbara W. Tuchman in 1984, The March of Folly: From Troy to Vietnam, may be a good place to start to answer this question. Tuchman explains how smart people in power can do stupid things. The book illustrates how governments act against their own best interests, making policy mistakes and strategic blunders. A fundamental lesson is that humanity seems unable to learn the lessons of history. In other words, why do countries keep shooting themselves in the foot?

As for history repeating itself, there was a 2019 Pandemic Flu exercise called “Crimson Contagion” run by the U.S. Department of Health and Human Services from January to August of 2019. The purpose of the exercise was to simulate the spread of a respiratory virus from China to the United States and killing nearly 586,000 Americans. The results of the exercise were defined by “confusion” and “bureaucratic chaos,” with friction emerging between the state and federal governments on issues ranging from equipment shortages to guidelines for social distancing. Sound familiar?

There’s more. Among the most tangible results of “Crimson Contagion” was an “inability to quickly replenish certain medical supplies, given that much of the product comes from overseas.” The U.S. is paying a high price for being caught so flatfooted and the government is now playing catch up.

Best to recall the words attributed to Winston Churchill: “Americans can always be counted on to do the right thing after they have exhausted all other possibilities.”