Reviving the Economy

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Various government officials have proposed guidelines for re-opening the U.S. economy. Earlier I wrote about what testing will and will not do when making this decision. It’s pretty obvious that governors will be the main decision-makers. President Trump has proposed a three phase process for reviving the economy.[1] California Governor Gavin Newsom has issued guidelines while making confusing and contradictory statements about who will make the ultimate decision.[2]

I’ll first review the statements issued by Pres. Trump and Gov. Newsom.  Then I’ll describe an optimal political strategy for governors in general. California’s diversity reinforces this strategy. This is about reviving the economy.

Here’s President Trump

“We are not opening all at once, but one careful step at a time,” Trump said, adding that the guidelines were “based on hard verifiable data.”

He added: “Some states will be able to open up sooner than others.”

“Phase One” is for areas of the country who solely satisfy the criteria laid out by the White House and calls for social distancing to remain in place, avoiding gathering of more than 10 people, and avoiding any unnecessary travel.

“Phase Two,” which is for regions that have met the criteria twice and have not seen “a rebound” in infections, still calls for residents to practice social distancing and try to avoid large gathering but opens up the possibility of resuming non-essential travel.

The third phase, which is for areas who have met the criteria three times and have no rebounds of the virus, is the most open and allows vulnerable parts of the population to go back in public, opening back up gyms and bars, resuming full-time staffing at worksites and letting people head back to large venues like restaurants, movie theaters, churches and sports venues – albeit at a reduced capacity.

“This is a gradual process,” Trump said. “Throughout the process, citizens will still be called on to use all the weapons in this war.”

The President has often struggled with the concept of Federalism.  That ambivalence is reflected in his comments above.  But at least these are only guidelines.  And, as we’ll see, he is not alone in his ambivalence.

And Here’s Governor Newsom

Local officials will have a “profound and outsize influence” on any decision to lift public health orders, Newsom said. He went on to outline six key indicators that will guide the state’s decision as it considers lifting the stay-at-home order:“The ability to monitor and protect our communities through testing, contact tracing, isolating, and supporting those who are positive or exposed;

  • The ability to prevent infection in people who are at risk for more severe COVID-19;
  • The ability of the hospital and health systems to handle surges;
  • The ability to develop therapeutics to meet the demand;’
  • The ability for businesses, schools, and child care facilities to support physical distancing; and
  • The ability to determine when to reinstitute certain measures, such as the stay-at-home orders, if necessary.”

    Newsom declined to offer a timeline on when the order might be lifted, but he told reporters that if the six requirements are met by the first week of May, “ask me the question then.” However, he cautioned that lifting the order too early could have dire consequences if the virus begins to spread rapidly.

Local officials will have a profound and outsided influence on Gov. Newsom’s decision.  Anyone who believes that has not spent much time watching our governor.  He is as dictatorial as Gray Davis with about the same degree of intelligence.  But the last paragraph gives the game away.  He will make the decision for the entire state.

A Better Strategy

Like most states, California is geographically and demographically diverse.  Population density by county ranges from 18,836 per square kilometer (San Francisco) to 1.5 in Alpine county.  Here are the five most densely populated counties in the state:[3]

Five most dense Reviving the economy

Five most dense

And the five least dense:

Five least dense Reviving the economy

Five least dense

Social distancing will probably not be much of a problem in Alpine County.

The point is that counties are a far better measure of the cost of social distancing than an entire state.  There may be exceptions, perhaps Vermont and Wyoming.  In San Francisco staying six feet away from others is likely to be difficult.  For those who are curious, here’s a heat map of population density for the entire state.  The source is in footnote 3 below.

Pop Density Heat Map Reviving the economy

Pop Density Heat Map (darker color means higher density) (click for larger image)

What does this imply about a pretty good strategy for reopening California’s economy?  The answer is fairly clear: reopening the entire state on a single date is likely to fail spectacularly.  Allowing mayors and county commissions to make the decision will produce a better response.  And this strategy has the added advantage of featuring one of the politician’s best tools: blame-shifting.  Governor Newsom can point to local officials when (inevitably) something goes wrong.

Added note. Using counties is a compromise.  The astute reader will have noticed two counties  absent from the five most dense counties.  Those are Sacramento and San Diego.  While the cities are undoubtedly pretty dense, the counties encompass many sparsely populated areas.  If Governor Newsom is very smart he will make exceptions for counties that have a single very large city.  Offhand, Sacramento and San Diego are the only ones that come to mind.

Because I have too much time on my hands, here’s a graph showing the counties in order of density.  Make of it what you will.

Density chart Reviving the economy

(click for larger image)

  1. Andrew O’Reilly, April 17, 2020. “Trump unveils coronavirus guidelines for rolling back social distancing in phases: ‘Next front in our war’.” Fox News. Available at https://www.foxnews.com/politics/trump-announces-new-coronavirus-guidelines-for-opening-up-america-again. Accessed April 23, 2020.
  2. William Feuer, April 15, 2020. “California Gov. Gavin Newsom unveils guide to lifting state’s coronavirus restrictions.” CNBC. Available at https://www.cnbc.com/2020/04/14/california-gov-gavin-newsom-unveils-guide-to-lifting-coronavirus-restrictions.html. Accessed April 23, 2020.
  3. Data was painfully extracted from https://worldpopulationreview.com/states/california-population/#densityByCounty on April 23, 2020.
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About Tony Lima

Retired after teaching economics at California State Univ., East Bay (Hayward, CA). Ph.D., economics, Stanford. Also taught MBA finance at the California University of Management and Technology. Occasionally take on a consulting project if it's interesting. Other interests include wine and technology.