Don't count on the government to protect you
By Scott Sumner
[Before starting, let me point out that there is a new Macromusings podcast where David Beckworth interviews me on the role of monetary policy in an epidemic.]
Many people became disillusioned with the government when it failed to respond to warnings that might have prevented 9/11, or warnings that the Madoff hedge fund was a scam, or the excuses used to invade Iraq. For me, the recession of 2008-09 had a major effect on my view of government.
Prior to the recession, I had read many academic articles discussing “foolproof” ways to escape a liquidity trap. Thus I was quite dismayed to discover that the Fed had no plan to deal with the zero bound issue.
This isn’t about the people in the government, who are often quite talented. Ben Bernanke was one of those academics that discussed methods for escaping a liquidity trap, such as level targeting and a “whatever it takes approach” to QE. But he was not able to convince his colleagues at the Fed of their merit. Nor does it matter which party is in charge; governments are big, cumbersome institutions, not capable of protecting us in a crisis.
Now we see that the US government is woefully unprepared for Covid-19, despite many previous predictions that a pandemic was inevitable. The stockpiles of surgical masks are barely 10% of what’s needed, and the rollout of testing facilities has been much slower than in countries such as South Korea. Regulations against predatory pricing slow the manufacture of new masks. Programs put in place after the SARS epidemic were abandoned a few years later when people lost interest.
Some people argue that we need to centralize information dissemination so that “the government speaks with one voice”. This would be a disaster. Mike Pence doesn’t know any more about this than you or I do, indeed he botched the HIV epidemic in Indiana when he was governor. It’s much better to have a wide variety of government experts offer their opinions, even if their views differ.
This also applies to other existential risks, such an accidental nuclear war, solar flares from the sun, asteroid/comet strike, AI run amok, Yellowstone eruptions, etc. Don’t assume the government has a secret plan if there is a disaster. They’ll be just as dazed and confused as the public.