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Stop Harming Small Businesses with the Pandemic Reaction

May 20, 2020

We find ourselves on the downhill side the COVID-19 pandemic in the U.S. I first want to say I respect what this virus can do, and I understand the trepidation that most have about re-opening our economy.  I also respect anyone who feels they need to act in a certain way to protect themselves and their family from this virus, in whatever way they feel necessary.

This blog post is not meant to be political. However, for this post to be effective, our politicians must act. I think there are several valuable lessons we can learn from this experience…. that can help us better plan for future emergencies and hopefully get our economy back up and running.

First, a recap of the past few months.

The Quarantine

Our government decided to quarantine the entire population except for what they called “essential workers”. For the most part, liquor stores, marijuana stores, grocery stores, online retailers, hospitals and large retailers remained open. All sporting events and gatherings of any kind were cancelled.

This condition was initially intended to last 14-days. Why 14-days? Because that's how long it takes to show symptoms of being sick. Now, we have exceeded 60-days of stay-at-home orders and the governors are planning to carefully open up their states.  

Economic Impact

We saw a 30% sell-off in stocks, a shocking rise in the number of unemployed from 3.5% to what is expected to be 25% by June.

To limit the economic damage the government knew would result from their actions, they injected close to $5 Trillion into the economy through bailouts, loans, and cash payments.

Our farmers are destroying crops they’re not able to sell to restaurants and grocery stores. Meat packing plants have been ordered to halt production because of virus outbreaks. That means that ranchers are killing livestock that has no place to go. Dairy farmers are dumping milk.

Business bankruptcies have thus far increased by 26% over 2019; and are expected to rise sharply as businesses run out of funds from government loans and grants.

Healthcare

During the COVID-19 pandemic, hospitals were instructed to only take on COVID-19 cases and handling only medical emergencies. As it turned out that most healthcare facilities are under-occupied by 30%, we have a glut of ventilators and most are afraid to go to the hospital. This miscalculation is forcing our healthcare industry to furlough skilled employees.

Education

As part of the quarantine, our schools closed and forced students into their homes for home-schooling by parents. All colleges closed their campuses and sent their students to their homes to receive virtual educations.

The Pandemic Death Toll

Surely, we endured these sacrifices because lives were at stake. Right? I’ll give you the statistics and let you decide.

The current death toll in the United States from the COVID-19 virus ranges from the 67,008 currently verified by the Center for Disease Control (CDC) to 93,051 reported by popular news outlets. It seems reasonable to assume that these numbers will grow to close to 100,000 by the time we have extricated ourselves from this pandemic in 2020.

To give you some perspective, a flu epidemic that never makes the news results in 50,000 to 100,000 deaths each year in the U.S.

The infection rate of COVID-19 is estimated to be approximately 1.0% of our population. Of those infected, 2.2% die. This death rate is highly dependent on age. People over the age of 65, have a 10% chance of dying from the COVID-19 virus once they are infected.  People between the ages of 55 and 64, have a 2% chance of dying once they’re infected. Below the age of 55, you have a 0.14% chance of dying once you are infected. Roughly 80% of our current workforce is under the age of 55. Ironically, many workers over the age of 55 were deemed essential workers.

Another statistic to consider is that most infections didn’t happen in public places. Instead, they occurred at home where the infected patients claimed they followed all the safety protocols advocated by healthcare officials.

In summary...

  • Death tolls comparable to traditional flu
  • Highly contagious
  • Deadly to elderly and not working class
  • Most got infected in their homes

Was the economic crash and other devastation worth the reaction that ensured? You decide.

Why does any of this matter?

As I watched the pandemic materialize, I thought of my small business owner clients. As you may or may not know, the small business owner is the heart and soul of a free-market economy.

Everything that happened in the U.S. was most detrimental to the small business community. We will most likely recover from the economic damage that we’ve created for ourselves. But the economic landscape will never be the same for small business owners.

Here are the shifts that may last a very long time:

Shifting from Small to Big

Our government directed small businesses to stop doing business while they injected cash into the economy that consumers could only spend with the businesses who remained open.  The open businesses included big box stores, online retailers, grocery stores and liquor stores. If it wasn’t hard enough for the small entrepreneur to compete with these giants, it just became that much harder when the government tilts the playing field in the favor of large companies.

Shifting from Hard to Confusing

The federal government offered “forgivable loans” that had to be spent on retaining employees. This offer was only made to businesses who had been in business for over a year and could prove 2019 income and expenses. At the same time, they paid displaced employees to stay unemployed. Many small business owners lost employees they’ll never get back… and are stuck repaying a loan with no revenue. 

Shifting from Private to Public

Since the sales tax base was decimated, most local and state governments will be facing severe deficits. The federal government will borrow even more money to pay to these governments.  In addition, the feds will borrow and spend on infrastructure projects to fill the gap being left behind by bankrupted small businesses. While this makes complete sense on a macro-economic scale, it will result in a further shift of private sector jobs to the public sector.

Shifting Costs from Present to Future

When the federal government increases their debt, they must also increase their interest payments.  In 2020, the U.S. is expected to pay $550 Billion in interest costs alone. To give you some sense of how much this is, our military is one of the largest in the world by far, and it costs $600 Billion per year. This high interest payment reduces what we can spend on needed government services. This means our children and grandchildren are paying for our current folly through reduced services. If we keep interest rates low, then the elderly who rely on these safe financial returns will have less in their retirement. All of this will be happening in an inflationary environment that will not serve anyone well.

What can we do differently?

Now that we know how this virus acts, we quarantine the sick, the elderly and those with compromised immune systems. The rest of the population can and should live their lives as they normally would.  That’s right. No social distancing, no closed beaches, no closed businesses, no closed schools and no closed colleges, no masks, and no cancelled events.

For those of you who are freaking out right now, you should know that another country did exactly what I’m proposing. Sweden instituted the quarantine plan I think we should have followed. If we go by the statistics we see in Sweden, their death toll exceeds ours by approximately 10% right now.  This doesn’t mean that they’ll ultimately lose an additional 10% of their citizens to COVID-19.  It simply means that their population will experience the tragedy sooner than ours because they didn’t attempt to flatten their curve as we did with restrictive stay-at-home orders.  Their economy will continue as it always had, while we try to dig ourselves out of the deep pit we’ve dug.

What can we do now?

Let’s not dwell on the past. Our government leaders followed the advice of medical experts. To be fair, I’m looking at this entire situation in the rear view mirror. I can analyze past statistics. Government leaders had to rely on future projections. Enough about the past. What do we do now?

This is NOT a Republican or Democratic Party issue. I implore you to do your own research. Don’t take my word for it. Then talk to your government leaders however you can. I know that many states are allowing businesses to open. However, the restrictions are so onerous that many will struggle to make it. As remarkable as it sounds, many governors are claiming they will continue lock downs into the Fall. This overreaction has harmed so many in the last two months. Can you imagine what it will do over the summer? We now know there’s no reason for this level of control. The numbers tell the story.

I believe that most government officials genuinely care about their constituents regardless of their political affiliation and they can move in a positive direction.

No matter what happens, I continue to urge you to look at this pandemic as an opportunity in how you can grow your business during this break… and I wish you the best in your business.

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