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U.S. Economy Suffers Biggest Quarterly Decline Ever, Under Coronavirus Lockdowns

U.S. economic output declined by an annual rate of 32.9 percent in the second quarter of the year, according to the U.S. Department of Commerce.

That is the largest quarterly decline in U.S. gross domestic product (GDP) ever recorded. Official U.S. government records of quarterly GDP are available only for the years 1947 and after.

The decrease in spending on services, caused by the government lockdowns, accounted for the great majority of the decline, CNBC reports:

“Personal consumption, which historically has accounted for about two-thirds of all activity in the U.S., subtracted 25% from the Q2 total, with services accounting for nearly all that drop.”

It is likely that this is the worst quarterly decrease for at least a century, with the short depression of 1920-1921 a close second. The latter depression was quickly remedied by the Harding administration’s swift action to cut government spending by 82 percent, decrease taxes, and allow interest rates to rise and prices to fall.

The U.S. House of Representatives and Senate are considering bills for additional coronavirus relief on top of the nearly $3 trillion spent so far.

Such a further increase in government spending would be a big mistake, says John Berlau, a senior fellow at the Competitive Enterprise Institute.

“It’s not surprising the economy is contracting, when governments have forced whole sectors to shut down and consumers are cautiously avoiding a variety of commercial activities they believe could endanger their health,” said Berlau. “But massive new spending is not the answer, and it would cause more economic harm.”

Benjamin Zycher, a resident scholar at the American Enterprise Institute, says the federal government’s initial actions directed toward sustaining consumer demand were justified, though Fed policy has been ill-advised in recent years.

“The fiscal response thus far has been O.K. overall,” said Zycher. “There was a real need to maintain consumption as much as possible, but I think that the zero-interest rate Fed policy is deeply unwise, and the growing effort to impose constraints on the slope of the yield curve is perverse.”

The economic contraction is a short-term shock best dealt with by allowing the private sector to fix what the government broke, says Brian Domitrovic, Ph.D., the Richard S. Strong Scholar at the Laffer Center.

“GDP can go up just as fast as it can go down,” said Domitrovic. “It was [government] force, along with a mass of private decisions to stay away from economic activity, that caused the drop. Absent the disease condition, GDP should snap back wholly. With persistent conditions, the snap-back should approach the original line on account of new practices developed to deal with it.”

It’s important to remember that the U.S. economy was doing very well before the coronavirus shutdowns, says Ed Hudgins, a senior fellow at The Heartland Institute.

“This is a recession different from all others, not only because the cause was the government reaction to COVID-19 but also because it was preceded by an economy stronger than any in many decades,” Hudgins said. “Sadly, the government-mandated shutdowns have put many smaller enterprises out of business permanently.”

Financing additional spending with more federal debt would only worsen the situation, says Don Devine, a senior scholar at the Fund for American Studies who served as President Reagan’s director of the U.S. Office of Personnel Management.

“In the long run, debt will slow everything down or worse,” said Devine. “The government has made its bed and will have to live with it.”

“Another aid package that is not tightly focused could be a ticking inflationary time bomb,” said Hudgins.

Instead of spending more borrowed money as Congress is considering, the federal government should turn to policies that have consistently proven to unleash economic growth, especially deregulation, says Iain Murray, senior fellow and vice president for strategy at the Competitive Enterprise Institute.

“This is as much a supply shock as a demand shock,” said Murray. “To get the supply side moving, we need supply side policies, to wit: deregulation and tax cuts on employers. Congress only seems to be talking about demand side help. There needs to be a deregulation title in any Phase IV relief bill. Some states and the [Trump] administration have done a good job on getting rid of never-needed regulations, but they need to go further. And the last thing we need is more job-killing regulation like expanding California’s AB5, which has made working from home difficult at exactly the wrong time.”

Regulatory reform would have a powerful effect in stimulating economic growth, says Berlau.

“What we need is a deregulatory stimulus: wholesale repeal of laws and regulations that keep businesses from adapting to serve customers given the realities of Covid-19,” said Berlau.

“Lawmakers should specifically concentrate on regulatory barriers to innovations that could help small businesses weather the storm,” said Berlau. “For instance, some restaurants have smartly opened food pantries and turned their sidewalks into sidewalk cafes. We should get rid of any rules or laws that prevent restaurants or other businesses from safely innovating like this to better serve their customers during these trying times.”

The government’s initial response of borrowing at unusually low interest rates in order to deal with a crisis was justified, says Hillsdale College economics professor Gary Wolfram.

“Given that the economic downturn was not due to failed actions of the private sector, I do believe it was necessary for the Federal Reserve to respond in the way it did,” said Wolfram. “Also, with 30 year Treasury bonds selling at the current rate, it can make sense to use fiscal policy to combat the pandemic and borrow at very long rates. Given that the long-term government debt problem is in the mandated costs of Social Security, Medicare, and Medicaid, I am not as concerned about running a deficit to deal with a unique temporary phenomenon.”

A full cure for the economy will probably have to await the development of a vaccine for the coronavirus, says Zycher.

“I think that there will be a continued slow recovery as individuals, businesses, and the market learn to make adjustments to the pandemic in ways that are increasing in efficiency,” said Zycher. “But I doubt that there will be a ‘rapid’ recovery, however defined, until there is a vaccine, an effective and inexpensive treatment, and until the achievement for the population of herd immunity, the minimum extent of which is unknown.”

Wolfram agrees that a full economic recovery depends on progress toward a vaccine, in which deregulation could play a big part.

“My feeling is that the market-based economy will result in a recovery in a reasonable length of time, but it will take the development of a vaccine,” says Wolfram. “One interesting aspect of this has been the removal of government barriers to innovation in the creation of a vaccine.”

Lawmakers should recognize that the fundamentals of the economy are good and government intervention is the problem, not the solution, says Domitrovic.

“The stock market is very interesting—it is saying don’t blow it, you can handle it,” said Domitrovic.

Editor’s note: This story first appeared at Heartland Daily News. Republished by permission.

News

Ohio Board of Pharmacy Reverses Rule, Okays Hydroxychloroquine After Governor’s Request

 

The Ohio Board of Pharmacy reversed a ban on the use of hydroxychloroquine for treatment of coronavirus infections following a request from Ohio Gov. Mike DeWine (.R) on Thursday, asking the pharmacy board to reverse the ban, Breitbart reports.

“I agree with the statement from Dr. Steven Hahn, Commissioner of the Food and Drug Administration, that the decision about prescribing hydroxychloroquine to treat COVID-19 should be between a doctor and a patient,” DeWine said in a statement. “Therefore, I am asking the Ohio Board of Pharmacy to halt their new rule prohibiting the selling or dispensing of hydroxychloroquine or chloroquine for the treatment or prevention of COVID-19.”

“The Board of Pharmacy and the State Medical Board of Ohio should revisit the issue, listen to the best medical science, and open the process up for comment and testimony from expe[Hydroxychloroquine and chloroquine] have been prescribed to treat malaria, lupus and rheumatoid arthritis, the Food and Drug Administration said.

The U.S. Food and Drug Administration in mid-June revoked an emergency authorization for hydroxychloroquine that had allowed it to be used to treat COVID-19 patients. In July  the FDA posted a review of safety issues related to that use.

The FDA said there are reports of serious heart rhythm problems, blood and lymph system disorders, kidney injuries, and liver problems and failure.

Despite the FDA’s revocation and until now, it could technically still be used for off-label treatment of the virus in Ohio.

But as Breitbart News reported, “some physicians claim the public is being denied accurate information about treatment for the coronavirus, including those who held a summit and press conference in Washington, DC, earlier this week.”

Breitbart News posted a video of the event, which was removed from social media platforms:

According to Breitbart, “Facebook has removed a video posted by Breitbart News earlier today, which was the top-performing Facebook post in the world Monday afternoon, of a press conference in D.C. held by the group America’s Frontline Doctors and organized and sponsored by the Tea Party Patriots. The press conference featured Rep. Ralph Norman (R-SC) and frontline doctors sharing their views and opinions on coronavirus and the medical response to the pandemic. YouTube (which is owned by Google) and Twitter subsequently removed footage of the press conference as well.”

The event, hosted by the organization America’s Frontline Doctors, a group founded by Dr. Simone Gold, a board-certified physician and attorney, and made up of medical doctors, came together to address what the group calls a “massive disinformation campaign” about the coronavirus, Brietbart reported.

News

Rep. Gohmert Says He Will Use Hydroxychloroquine to Treat Coronavirus

Rep. Louie Gohmert (R-Texas) appeared on “Hannity” Wednesday and said he planned to take hydroxychloroquine as part of his treatment for COVID-19. The lawmaker tested positive earlier in the day for coronavirus prior to the Trump Texas trip, Fox News reports.

“My doctor and I are all in,” Gohmert told host Sean Hannity from quarantine. “And I got a text just before I came on from a dear friend, [a] doctor, who just found out he had it, and he said he started a HCQ [hydroxychloroquine] regimen, too.

“So zinc, erythromycin, and hydroxychloroquine,” the congressman added, “and that will start just in the next day or two.”

Gohmert was supposed to travel to Texas with Trump that same day, but tested positive at the White House during routine screening prior to the trip

Attorney General Bill Barr, who encountered Gohmert Tuesday while testifying before the House Judiciary Committee, tested negative for the virus Wednesday.

“He [Trump] called me from Air Force One on the way home tonight and I said … ‘Mr. President, if you would not [have] invited me to go with you to West Texas, I would never have known I had the coronavirus,'” Gohmert said. “That’s what I got tested for it and then I found out I had it.”

Gohmert, hasn’t worn a mask around the Capitol, told CNN last month he would never wear a face mask unless he got the virus.

“I got a tiny little taste of what you and the president get every day,” Gohmert told the host. “The left went nuts.”

News

Pelosi Vows to Block Coronavirus Liability Protections

Speaker of the House Nancy Pelosi (D-CA) said on CBS News’ “Face the Nation” Sunday that Democrats will not support liability protections for employers of “essential workers” in the next coronavirus package.

Senate Majority Leader Mitch McConnell (R-KY) previously said inclusion of liability protections for businesses and doctors was mandatory for any agreement on a coronavirus relief bill. “If there’s any red line, it’s on litigation,” he said. He added, “If there is another bill that passes in the Senate, it will include the liability protections,” Breitbart reports.

Pelosi said the Democrat party’s opposition to liability protections for “essential” businesses was about workers’ health and safety and argued that liability protection would fail to make employers responsible for ensuring workplaces are safe while also providing no recourse for workers who do get sick.

Allowing workers to sue employers for allegations of negligence related to coronavirus is about “responsibility,” she said.

MARGARET BRENNAN: Some of the companies and even universities out there have said that they do need some kind of liability protections. Is — are you open to a deal that includes that?

SPEAKER PELOSI: Well, there are some suggestions that relate to academics to schools and the rest. We have an initiative in California to that respect, but what we will not support is the following: What they’re saying to essential workers, you have to go to work because you’re essential. We’ve placed no responsibility on your employer to make that workplace safe and if you get sick, you have no recourse because we’ve given your employer protection. And if you don’t go to work because you’re afraid of being sick and you have that job opportunity, you don’t get unemployment insurance. This is so unfair. Let’s just get to the heart of it. At the point of all of this is, this president — I have a new name for him, Mr. Make Matters Worse. He has made matters worse from the start. Delay, denial. It’s a hoax. It’ll go away magically. It’s a miracle, and all the rest. And we’re in this situation with — you spelled out some of the numbers very clearly early. So it makes matters worse — now then we send our children to school. The best way to send our children school is to fund it, to fund it. The ventilation —

BRENNAN: Yes.

PELOSI: The spacing, the additional teachers and to lower the infection rate in the community in which they exist. That takes money.

BRENNAN: Yes.

“Companies have said they could be vulnerable to a wave of lawsuits if their workers get sick during the pandemic,” Axios reported. Democrats are the largest recipients of political donations from lawyers, law firms and liability lobbyists.

News

Dr. Fauci ‘Was Not Invited’ to Trump’s Chinese Virus Briefing

Dr. Anthony Fauci, the renowned infectious disease expert told CNN that he was not invited to President Donald Trump’s coronavirus briefing on Tuesday evening, The New York Post reports.

“I was not invited, up to this point,” Fauci told host Jake Tapper in a live interview less than an hour before Trump was slated to address reporters in the White House briefing room at 5 p.m.

“I’m assuming that I’m not going to be there because it’s going to be just a short while and I’m still here at the NIH so I’m assuming I’m not going to be there,” he continued.

Fauci, the director of the National Institute of Allergy and Infectious Diseases has faced criticism in recent weeks from President Donald Trump and other administration officials surrounding his response to the pandemic.

President Trump called Fauci an “alarmist” during an interview with Chris Wallace on “Fox News Sunday.”

Fauci, who has described the attacks against him as “bizarre,” pushed back on that criticism on Monday, saying he was more of a “realist.”

Trump this week announced he was bringing back the nightly briefings he held at the peak of the COVID-19 pandemic in March and April.

News

Kentucky Couple Placed Under House Arrest Due to Refusal to Self-Quarantine

After a Kentucky woman tested positive for the coronavirus, her entire family was placed under house arrest and forced to wear ankle monitors to prevent them from leaving, as reported by the New York Post.

Elizabeth Linscott, who was planning to visit her family in Michigan, first got tested for the coronavirus as a safety measure. But upon learning that she had tested positive despite showing no symptoms, the state’s Health Department sent her an email demanding that she “check in daily with her symptoms, self-isolate, and let officials know if she has to seek hospital treatment.”

Linscott, however, refused to adhere to such demands since she believed it would prevent her from going to the emergency room if she ever faced a real emergency, due to first requiring her to get special permission from the government to do so.

As a result, the family’s home was visited several days later by government agents. Linscott’s husband Isaiah answered the door to “eight different people,” including “a guy in a suit with a mask” from the Health Department, who handed Isaiah three different documents to sign: One for himself, one for Elizabeth, and one for their daughter.

The officials then ordered the couple placed under house arrest, with Elizabeth and Isaiah forced to wear ankle monitors that would sound an alarm if they traveled more than 200 feet from their house.

Elizabeth, speaking to the press, pointed out how unjust the treatment was, noting that “we didn’t rob a store, we didn’t steal something, we didn’t hit and run, we didn’t do anything wrong.” When reached out to by the press, the local health department refused to give a comment, using the family’s “privacy” as an excuse.