Virginia tax revenue fell $700 million in April compared to the same month a year ago, a 26.2% drop. That decline, of course, reflects the nosedive in the economy that generates tax revenues. In response to this news, according to the Richmond Times-Dispatch, Governor Ralph Northam made a telling comment yesterday that sums up his approach to the COVID-19 epidemic:
As anticipated, this is the first monthly revenue report to reflect the significant negative impacts of COVID-19 on the health of our commonwealth’s finances. We are facing an unprecedented health and economic crisis, and we must combat this virus before we can begin to repair our economy. My top priorities continue to be protecting the health and safety of all Virginians.
Northam is hardly alone in holding these sentiments. They are shared by most Democratic elected officials, a few Republicans, almost the entirety of the news media, and much of the public. The belief that “we must combat this virus before we can begin to repair our economy” is driving public policy in Virginia and many other states.
Thank you, Governor, for stating the philosophical principle at stake so plainly.
There are so many flaws in this reasoning, it’s hard to know where to begin, but I shall address the most obvious.
The monomaniacal focus on the virus, which we can measure in real-time, ignores health issues we cannot measure in real time. There are many deficiencies in the COVID-19 statistics reported by the state, but they do give us a rough idea of what’s happening day by day. By contrast, the adverse health effects of the economic shutdown and soaring unemployment — anxiety, depression, suicides, substance abuse, domestic abuse, child neglect, child malnutrition, delayed surgeries and procedures — are largely invisible. Either no one collects the statistics, or the statistics are reported after lengthy delays, typically a year or more. By focusing exclusively on what we can measure right now, we ignore the potentially devastating human toll the shutdown is taking. In Northam’s reckoning, if he can’t see it, it doesn’t count.
If the economy collapses, we lose our ability to fight the virus — and provide health care to all. Our society needs tax revenue to fight the virus and maintain the health care system, which now consumes almost one fifth of the economy. COVID-19 patients are not the only people in the commonwealth who require health care.
So far the COVID-19 epidemic has accounted for 3,657 hospitalizations. We have hardly seen the end to the epidemic, so let’s say the number doubles. Hell’s bells, let’s say the number quadruples before the virus dies down. Let’s say 15,000 Virginians are ultimately hospitalized because of the virus. That compares to 850,000 hospitalizations in 2015 (the most recent year for which I could find data) from other causes. That’s a whole lot of people suffering from cancer, heart disease, diabetes, gunshots, automobile accidents, and whatever else sends people to the hospital.
If you cripple the economy, you cripple the healthcare system. Virginia hospitals lost roughly $200 million from the prolonged shutdown of elective surgery. Some hospitals have the financial wherewithal to survive. Others don’t, particularly rural hospitals. Beyond that shutdown, which Northam finally ended, we have to worry what happens when hundreds of thousands of Virginians lose their jobs. How many will lose their company-provided insurance? Even if they get picked up by Virginia’s expanded Medicaid program, what is the financial impact on hospitals from shifting a couple hundred thousand workers from profitable private insurance patients to unprofitable Medicaid patients? Moreover, what is the difference in the quality of healthcare provided by private insurance and Medicaid for the patients?
Speaking of Medicaid, how much Medicaid can the state afford if the tax base shrinks by 26% long-term?
Virginia can walk and chew gum at the same time. The idea that we must combat the virus before addressing the economy is based on the flawed premise that it’s an either/or situation. We can combat the virus and accelerate the reopening of the economy. For example:
- We can more rapidly reopen the economy in regions where the virus is spreading slowly, particularly in western Virginia.
- We can focus resources on controlling outbreaks (10 or more infections in the same location) in higher-risk settings such as nursing homes, correctional facilities, schools, colleges, and entertainment venues rather than in low-risk settings such as… hiking trails and the beachfront.
- We can count on the elderly and medically vulnerable to continue maintaining social distancing voluntarily.
- We can count on business enterprises to adopt measures — plastic screens at checkout counters, continual cleaning, maintaining social distancing, employees wearing face masks — that will significantly reduce the spread of the virus.
- We can continue maintaining the restrictions that provide the most bang for the buck, so to speak, such as restricting large-scale gatherings.
There is no such thing as zero risk. It is impossible for state government action to exterminate the COVID-19 virus. The name of the game is weighing and balancing risks. Northam is focusing on reducing one set of risks stemming from the virus. Meanwhile, his actions increase the risks associated with devastating the economy, laying waste to the health care system, and undermining the financial strength of not only state and local governments, but universities, port and airport authorities, mass transit systems, housing authorities, economic development authorities, and a host of other institutions.
We can always scale back. If we accelerate the return to normalcy and the virus begins spreading more rapidly than before, and the price paid gets too high, we can always re-calibrate and re-introduce restrictions where they are most needed.
Frankly, I find the Governor’s philosophical position to be indefensible. When all the numbers come in — not just the COVID-19 statistics, but the economic data, the job loss numbers, the tax-revenue numbers, the hospital finance numbers, the mental health numbers, the non-COVID mortality numbers — we could well find that the unnecessarily prolonged shutdown did far more harm than good.
James Bacon is the publisher of baconsrebellion.com