Phase 2 of the coronavirus crisis is here
The U.S. is scrambling to prepare for the second phase of the coronavirus outbreak — beyond the threat, to the actual response — and hospitals, investors and policymakers are already behind.
Why it matters: It's no longer that this could be bad for the economy; the layoffs are starting. It's no longer that the health care system may be overmatched; hospitals privately admit they are on the verge of it.
- It’s no longer that this might surpass government’s abilities; we are headed to a $2 trillion deficit, invoking wartime powers, and vast and wide economic destruction.
- Partly because we were behind the eight ball on testing, taking too long to wrap our minds around what was coming, now we're scrambling into Phase 2, as well.
Hospitals and government agencies are trying to throw together enough medical supplies, and enough physical space, to do the work of responding to a widespread outbreak.
- Hospitals are postponing elective procedures, and even organ transplants, because they're expecting a big surge in coronavirus patients. Some non-coronavirus patients will soon be moved to the Navy's two hospital ships to free up hospital beds.
- New York University's now-vacant dorms may become makeshift hospital rooms, and cities are also looking to motels, vacant buildings and even RVs as quarantine sites.
- Faced with looming shortages of hospital beds, ventilators and face masks, President Trump has freed up military manufacturing tools, and some doctors are even making their own equipment out of common craft supplies.
The economic crisis is entering a new phase, too: Investors have gone from panic selling to logic selling.
- In Phase 1 of the crisis, major American companies saw their share prices sink on fears that the virus would ripple through the U.S. — even though the companies themselves were fundamentally sound.
- That's no longer true. Corporate America's backbone — brands like Hilton, Ford and American Airlines, which have been synonymous with national pride and prosperity — are in free fall.
- COVID-19 has cost them their customers and any prospect of revenue. It has forced them to send workers packing and to beseech the government for bailouts to make payroll.
“Capitalism does not work in an 18-month shutdown," prominent investor Bill Ackman, of Pershing Square Capital Management, said Wednesday on CNBC. "Capitalism can work in a 30-day shutdown.”
What's next: The Senate signed off on a coronavirus relief bill yesterday just as the White House formally proposed a separate $1 trillion relief and stimulus plan, with half the money going to cash payments to needy Americans.
- The working class is confronting a very real crisis: The U.S. has gone from near-record-low unemployment to mass layoffs and indefinite furloughs.
- Treasury Secretary Steven Mnuchin warned the Senate we could see 20% unemployment without a drastic aid package.
- Several states have already recorded dramatic spikes in applications for unemployment insurance, and the widespread shutdown of so much of the service industry has only just begun.