Power & Market
In recent weeks, we've been keeping an eye on weekly total deaths as they are reported by the Centers for Disease Control and Prevention (CDC). Weekly deaths—as opposed to COVID-19 death totals—provide some needed context. This is important, since we now know that doctors and health administrators are encouraged to be—in the words of Deborah Birx—"liberal" with counting COVID-19 deaths.
This week I'm looking at week 16 (the week ending April 18). The CDC says that week 17 data is "100% complete" but experience suggests that it will still be a week or two before we have 90 percent or so of the total.
Even week 16 will continue to adjust upward, but further large adjustments are unlikely at this point. These numbers are CDC estimates.
Looking at the data we do have, there were 67,059 total deaths in the US during the week ending April 18 (week 16). That's up 24 percent (or 13,206 deaths) over the week 16 average (53,852) for 2017–19. Using the average for 2017–19 as the baseline, "excess deaths" number about 13,000 or 0.004 percent of the US population. Interestingly, so far this year, only week 15 (the week ending April 11) has exceeded the total mortality for week 2 of 2018, which was 67,295. The 2017–18 season was a very bad flu year according to the CDC (week 1 is on the left in blue and week 16 is on the right in yellow for each year):
A large portion of this continues to come from New York State. In New York, the week 16 total was 4,056 deaths, which was 2,083 above the 2017–19 average of 1,972. So, about one-sixth of all excess death in week 16 came from New York. Deaths were up 105 percent over the average for week 16, with excess deaths at more than 2,000 for week 16:
Week 15 (the week ending April 11) may have been the peak week, if we assume COVID-19 was the driving factor in total deaths that week. Worldometer data suggests that COVID-19 deaths peaked the week ending April 11 and have fallen since then.
To offer an example of another large state, we can also look at Florida. Florida has not seen nearly the surge in total deaths that we've seen in New York or nationwide.
For week 16, total deaths in Florida were only up 8.4 percent (or 331 deaths) over the 2017–19 average for the week.
On the list of things that the government should not do, there must be a spot for the $750 billion corporate bond buying that is slated to begin this month. Under the Primary Market Corporate Credit Facility (PMCCF) and the Secondary Market Corporate Credit Facility (SMCCF), the Fed will lend money to the US government, which will make the appropriate bond purchases. Whether the Treasury will enlist the help of the best bond traders from Wall Street to actively trade in the market or whether a simple buy-and-hold strategy will be employed has yet to be seen. But this is what we know from this week’s press release, courtesy of the New York Fed:
the SMCCF is expected to begin purchasing eligible ETFs [exchange-traded funds] in early May. The PMCCF is expected to become operational and the SMCCF is expected to begin purchasing eligible corporate bonds soon thereafter.
Per the Federal Reserve, the PMCCF program is supposed to “provide companies access to credit so that they are better able to maintain business operations and capacity during the period of dislocations related to the pandemic,” while the SMCCF program is designed to “support credit to employers by providing liquidity to the market for outstanding corporate bonds.” These explanations sound both nebulous and temporary, so we will continue to monitor their development.
There are consequences to having a government buy and ultimately sell corporate bonds, such as artificially increasing bond prices, increasing the money supply, and effectively subsidizing certain corporations at the expense of taxpayers. An exhaustive list would be a laborious attempt to show what many policymakers appear not to know. Although it is important to factor in the immediate consequences, we must also consider one very important question: When will this end for good?
Whether or not the bonds are repaid or the securities successfully traded is not as important as the fact that once the program starts, it could become a permanent monetary tool for the Fed. Even worse, if the program is considered a success, it may lead to a wider acceptance of government ownership of other assets to be funded by Fed lending facilities.
To gain insight into these asset programs’ potential future, we can look at the European Union, whose central bank interventionism is more advanced. On Tuesday the German Federal Constitutional Court ruled that the European Central Bank (ECB) has three months to carry out a “proportionality assessment” of its now €2 trillion public bond program, known as the Public Sector Purchase Programme (PSPP), which began in 2015. Upon review of the assessment, the German court may block the ECB from buying German bonds due to a potential breach in the constitutionality of the asset program. In what can serve as a sign of things to come, the court said that:
the PSPP lowers general interest rates, it allows economically unviable companies to stay on the market. Finally, the longer the programme continues and the more its total volume increases, the greater the risk that the Eurosystem becomes dependent on Member State politics as it can no longer simply terminate and undo the programme without jeopardising the stability of the monetary union.
Even more inspiring than the ruling is the fact that the complaint was originated, as the Financial Times noted, by 1,750 people, led by German economists and legal professors!
Considering how many economic and legal professors there are in America, one would think that a significant number of them would consistently challenge the Fed and the government on issues such as multitrillion-dollar bailout programs, or at least make a concerted effort to enlighten the public on the government’s anticapitalist endeavors. Sadly, there seems to be little desire for the “experts” to bring this to the public’s attention, even though the public is liable to pay for these programs without ever consenting to them. If not academia, who will stand up against these borderline unconstitutional actions, which are nearly impossible to wind down once they begin?
In a world where the Left has declared everything from abortion to social media to be a human right, it is disheartening, to say the least, that so many who think of themselves as "progressive" have embraced wholesale violations of real human rights: namely, the rights to seek employment, to freely assemble, and to exercise one's religion.
The ban on searching for employment is the most damaging in its immediate effects, and the war against this right looks something like this: in the name of preventing the spread of disease, civil governments have taken to issuing decrees—in many cases without any sort of legal process that allows for appeal or public debate—shutting down businesses and prohibiting the free exercise of one's right to seek employment.
Why Looking for Work Is a Basic Human Right
In other words, individuals have been prohibited from entering into peaceful voluntary agreements with others to sell their labor in exchange for wages. For those who earn a living through independent contracting or selling goods and services, the effect is the same: commerce with others is forbidden, with the result being impoverishment and a loss of one's income.
In the American context, this is violation of several rights outlined in the Bill of Rights, most especially the property rights outlined in the Fifth Amendment. To be cut off from one's own labor and one's own right to enter into contracts is fundamentally a destruction of the basic right to control one's own property. But, of course, these rights are not specifically American. All human beings have these rights, whether recognized by government officials or not. A farm worker in Tanzania has these rights just as much as an insurance agent in Baltimore. To ignore these rights is no less backward than ignoring rights to free speech or the right to not be enslaved. Any governmental attempt to seize property in this way requires—morally speaking—due process.
The Inequality of Shutdowns
Those in favor of lockdowns and impoverishing millions insist that there is no other way. Unless we outlaw employment for millions, we are told, the death toll will be unacceptable. Of course, when pressed for what death toll is "acceptable," no answer is given. Is it six hundred thousand (the number who die from cancer in the US each year)? Sixty thousand (the number who typically die in the US from flu and pneumonia each year)? Some lesser number? One? This figure remains a great mystery. We are only told that human rights are null and void until the "experts" decide otherwise.
Politicians still, begrudgingly, allow some people to exercise their right to work for a living. These people are the ones in so-called essential lines of work. Which types of work are essential? Well, that's up to the arbitrary whims of the state governors who now rule by decree (and collect six-figure paychecks while cosigning others to unemployment). In some places, hardware stores are "essential." In other places, they are not. In some places, diagnostic procedures to find brain tumors are deemed "elective" and therefore verboten. In other places they're allowed.
Should private citizens violate these many prohibitions and limitations, the result is anything but voluntary: the state uses force (or the threat of force) to impose fines, jail time, and to revoke business licenses.
The result, of course, is mass unemployment and the loss of access to a wide variety of goods and services, including housing, transportation, education, insurance, and even basic necessities like food. The newly and forcibly unemployed are expected to be content to sit at home, go on welfare, prepare for bankruptcy, and watch their children go hungry.
Meanwhile, those who complain about the regime's callous and immoral disregard of human rights are denounced by the ruling (and very well-paid) technocrats.
Some especially out-of-touch pro-shutdown "COVID Warriors" rationalize it all by insisting that these prohibitions on earning a living are, as Dr. Anthony Fauci claims, mere inconveniences. It's easy to see why someone like Fauci might think this way. His government salary is $400,000 dollars (not including whatever lucrative contract work he has on the side), and there is little risk he'll be missing any mortgage payments any time soon.
Similarly, lots of white-collar "creative class" types who can work from home delight in lecturing other people about "staying home" and "flattening the curve" while working-class people who work in fields that require human interaction are just out of luck. Some simply can't afford to give up their incomes and wait around for small, inadequate government checks that may take weeks to arrive. At some point in the near future those checks will stop coming, an even in places where the state plans to ramp up welfare spending, the fact is a community must produce wealth before wealth can be distributed. An economy that is in decline will simply be redistributing a smaller and smaller pool of resources.
Not surprisingly, some business owners and contractors will try to open their businesses anyway. And some workers will still try to provide services in the marketplace—which is now a black market thanks to government decree. In these cases, the police—i.e., more government employees with safe jobs and hefty paychecks—intervene and arrest business owners, just to make sure the destitute aren't allowed to bring in a few bucks.
Those who support this systematic use of violence and harassment of peaceful citizens insist they have the moral high ground, and the crusaders for public health contend that they are are the only ones who care about human life while those execrable working-class barbers, hygienists, and front desk receptionists care only about filthy lucre.
The Costs of Unemployment and Isolation
In the real world, however, cutting people off from earning a living comes with many costs indeed. There is a growing mountain of data showing that unemployment leads to more deaths via drug abuse, suicide, and stroke. Other side effects are even more grim, such as the increase in domestic violence and child abuse recorded during these "stay at home" orders. Forcing people into isolation comes with real physchological effects that shorten lives.
But ignoring this reality is to be expected of those who have adopted the tunnel vision of the busybody and the public moralist. In the minds of the COVID Warriors, all that matters is the lives of the people the COVID Warriors have deemed important. Everyone else's life and well-being is of lesser importance. If there's more suicide and more child abuse, that's too bad, but it was all "worth it."
It should not surprise us that this war on human rights—led largely by smug intellectuals, billionaires, and politicians—has come wrapped in the mantle of moral supremacy. But such is the usual m.o. of those who view human rights as an inconvenient impediment to one's agenda. The Soviets insisted that they represented "the workers" and a revolution in favor of a more just world. The slave drivers of the Old South equated slavery with civilization itself. The absolutist monarchs of Renaissance Europe told themselves they were defenders of culture and God and national "honor." Then, as now, moral crusaders justified the destruction of dissidents, traitors, and anyone else who refused to repeat some variation of the slogan: "we're all in this together."
Most states and municipalities have shut down major sectors of their economies in the hope of minimizing the very real medical damage from the spread of the coronavirus. The benefit is assumed to be in saved lives, or at least a “flattened curve” that allows time for hospitals to ramp up capacity and for medical research to find treatments and a vaccine. To that extent, the economic shutdown will create a lot of good.
But it is reasonable to ask, “At what cost?” The economy is not some machine that can be turned off and on at the whim of politicians and medical experts. The economy is us, we the people, as we go about our daily lives trying to improve conditions for ourselves and our loved ones. As I write this, the shutdown has created more than 20 million additional unemployed workers and destroyed countless numbers of businesses. That is not a small cost. Is it worth it?
A rational person must ask if the benefits exceed the costs, or if the costs exceed the benefits. This is not easy to measure since benefits and costs do not always carry monetary values. Nevertheless, policymakers need to be aware of the tradeoffs and opportunity costs of their dictates. The argument is often put in terms of people vs. money. But that is an incorrect framework. It is about people vs. people, i.e. lives saved due to the shutdown (benefit) vs. lives lost due to the shutdown (cost).
Numerous economic studies show a high correlation between poverty and mortality, and between unemployment and mortality. Estimates range from a low of 10,000 additional deaths per percentage point increase in unemployment, to a high of 40,000. Suicides increase dramatically, the incidence of drug and alcohol abuse rises dramatically, crimes against persons and property increase, and critical medical care is postponed or canceled. The list goes on and on.
We must create income in order to create health. If we destroy income we will destroy health. But in order to create income, we must produce goods and services. Income is the payment for that production. We cannot shut down the economy, i.e., shut down production, and then print money to pretend it is not shut down. Money is merely a medium of exchange; it is not production-based income. At some point, the costs of the shutdown will exceed the benefits. But where is that point? For some wealthy individuals, that point will never be reached. For some poor individuals that point has already been exceeded. I believe that for the majority of people, we are fast approaching that tipping point.
If unemployment rises 20 percent above its preshutdown level, low-end estimates predict an additional 200,000 deaths. At 30 percent unemployment, it would be 300,000 deaths. Those numbers rise fourfold at the high end of the mortality estimates, so we could have over 1 million additional deaths from this economic shutdown.
Is it worth it? Isn’t there another way to minimize the medical damage from the coronavirus without creating such enormous medical damage from the economy? If the economy does not reopen within two to four weeks of this writing, we will see economic data not seen since the Great Depression in terms of unemployment (+25 percent) and lost GDP (–30 percent).
Some medical experts and politicians say that the economy should remain partially shut down until there are zero new coronavirus victims. Others say that it should remain shut for another 18–24 months, until an effective and safe vaccine has been developed and deployed. What madness!
To make matters worse, we are making this disastrous economic policy based on flawed (at best) medical data that is known to overstate coronavirus mortality. Why not err on the side of saving lives, rather than on the side of destroying them? We do know that the vast majority of people who contract coronavirus are either asymptomatic or have only minor symptoms. The highest levels of mortality are among the elderly who also have other preexisting health conditions. Why not focus on saving them instead of destroying the economy and the hundreds of thousands, perhaps millions, of lives that will go along with that?
It is an inconvenient question, I know, but one that must be asked.
On Tuesday in an interview with Reuters, the chief economist of the International Monetary Fund (IMF), Gita Gopinath, said that one hundred countries seek pandemic aid. This was only a few weeks after the managing director of the very same IMF, Kristalina Georgieva, said in an emergency statement that the IMF is ready to deploy all of its $1 trillion lending capacity. So far they have been making good on their promises, providing $114.49 million to Niger, $115.3 million to Burkina Faso, and $389 Million to El Salvador in just one day, as an example of financial aid packages to come.
This poses various economic problems, namely the impossibility of economic calculation under socialism, which Mises talked about in Human Action. Under this scenario, the question one must ask is: why did Niger “only” get $114 million while El Salvador received $389 million? Whether this was determined by a single economist or was a decision by an "expert committee," we must consider how such an allocation could have been made in a way that was not completely arbitrary or simply based on guesswork.
Supranational organizations such as the IMF and the World Bank raise numerous questions about sovereignty, freedom, and liberty; however, the economics of these organizations also deserve attention. What happens when the IMF runs into a liquidity issue and finds that it is short on funds to lend to member countries?
Enter the SDR
For those unfamiliar with precisely what special drawing rights (SDR) are, a definition can be found on the IMF’s factsheet. The problem is that this definition is not very enlightening:
The SDR serves as the unit of account of the IMF and some other international organizations. The SDR is neither a currency nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. SDRs can be exchanged for these currencies.
According to the IMF, the SDR is not a currency, but like a currency it can be created out of thin air and exchanged for the currencies of other countries. The exchange may be voluntary, but not always, because “if required, the IMF can also designate members to buy SDRs.”
Per Georgieva’s emergency statement:
And we are looking at other available options. Several low- and middle-income countries have asked the IMF to make an SDR allocation, as we did during the Global Financial Crisis, and we are exploring this option with our membership.
If the IMF does exhaust its $1 trillion lending capacity, it could simply issue more SDRs and allocate them among member nations and then instruct some nations to buy SDRs from others using their own currencies. A Financial Times article agrees that a new issuance of SDR is vital to helping poor countries, using an argument that can only be described as anticapitalist in nature:
Help must indeed be forthcoming. This is a moral duty and a practical necessity. The pandemic and its economic outcomes will only be defeated if they are defeated everywhere. But how? A large part of the answer is “with money”, as in rich countries. Worries about moral hazard are absurd.
What does this all mean for the average American? According to the same article, it probably means nothing, since:
Some will argue that a big new issue of SDRs would be inflationary. Yet, set against the monetary expansions now under way, even SDR 1tn is negligible.
In 2020, it does not matter if the economic advice comes from the head of the IMF, a prominent economist, or from a financial news article. The answer is always the same. Whatever the issue is, the economic panacea championed by anyone unfamiliar with Austrian economics is always creating more money. Whether it be a housing crisis, a debt crisis, or global pandemic, the only real question is “How much?” In 2021, when central bank balance sheets across the world are at unfathomable levels and interest rates are still zero bound, will the masses finally learn, or will they just demand more money?
In possibly the most draconian COVID-19 order I have seen, Gunnison County in central Colorado is closing off the county to everyone but full-time locals:
A public health order for Gunnison County was amended to prohibit all visitors, including non-resident homeowners from remaining in the county for the duration of the order.
The Public Health Director found that non-residents, visitors and non-resident homeowners from lower altitudes are at a greater risk for complications from COVID-19 infection than residents, who are acclimatized to the high altitude environment of Gunnison County, according to the order.
The county's top public health official also said in the order that that non-residents, regardless of whether they own a residence in Gunnison County, are imposing unnecessary burdens on health care, public services, first responders, food supplies and other essential services.
Visitors cannot stay unless granted an exemption or waiver by the Public Health Director. Those who violate this or any other portion of the public health order could face a fine of up to $5,000 and up to 18 months in jail.
The town of Gunnison is about a four-hour drive from Denver and is in a mountain valley where the temperature rarely reaches above the low 80s. There is a small four-year college there. The fishing on the Gunnison River is very good.
But they are apparently very unenthusiastic about visitors right now.
It is possible that county officials were inspired by Gunnison County's experience during the Spanish flu epidemic of 1918. At that time the county also closed itself off, and only a single resident died of the flu, which was quite an achievement.
At that time, though, it would have been a lot easier to close the town off, which was far more remote in 1918 than now. Today, US Highway 50, a major cross-state artery runs through Gunnison. This is no country road. Gunnison doesn't own it or fund it.
This leaves many questions unanswered. As the New York Post notes: "It’s unclear exactly how the order will be enforced." Indeed. Will truckers be arrested if they attempt to fill up with gas in town? Will owners of second homes there be arrested for attempting to drive to their own property? Moreover, the town's claim that its high altitude justifies the ordinance—because outsiders can't handle the lack of oxygen—is a bit sketchy. The altitude in the town of Gunnison is under eight thousand feet, which isn't very high for a resident of the Denver area, who would be used to an altitude of five to six thousand feet. But it may be that the primary target is foreigners and out-of-staters, most of whom are likely living at much lower elevations the rest of the year. It will be fun to see the extent of the county's tolerance for likely future lawsuits.
Update, April 9: The Texas Attorney General has issued a letter to Gunnison stating the Gunnison ordinance is "is a blatant violation of our Constitution. ... Paxton argues that the Privileges and Immunities Clause of the U.S. Constitution guarantees that a citizen of one state will be “treated as a welcome visitor rather than an unfriendly alien when temporarily present in another State.”
You knew it was bound to happen. Mainstream media organizations are using the novel coronavirus epidemic to open a new front on the War on Cash by trying to instill a fear of cash into the American public. As Nick Hankoff trenchantly writes:
Cash has been the target of the banking and financial elites for years. Now, the coronavirus pandemic is being used to frighten the masses into accepting a cashless society. That would mean the death of what’s left of our free society.
CBS News, CNN, and other mainstream outlets are fearmongering again. Alarmism is nothing new in the media world, but this time, it’s not about triggering panic buying or even pushing a political agenda.
The war on cash is about imposing a new meta-narrative. As economist Joseph Salerno explains, the cashless society forces all payments to be made through the financial system. It doesn’t end with monopoly control over transactions, though.
Being bound to computers for transactions kicks the door wide open to hardcore surveillance of personal activity and location data. Being eternally on the grid means relentless taxation and negative interest rates, which the Federal Reserve is already gearing up for.
None of this bothers the well-heeled boosters of a cashless society or their lackeys in the media. They want Americans reading about the threat of coronavirus cooties on their cash, which is absurd.
Germs, of course, can loiter all over credit and debit cards, smartphones, ATMs, and every other cash alternative device. Too bad implanted microchip technology isn’t further along, the banksters must be thinking.
In another CNN article, readers are practically shamed for withdrawing cash to save during a crisis. Every sentence, every word, every letter of the article is nuts.
A CBS News article wistfully describes how "bank note avoidance" was one of the measures taken to stem the novel coronavirus outbreak in South Korea, whose central bank removed all banknotes from circulation for two weeks and even burned some of them. The article even touts the practice of Iranian banks, which announced they will no longer accept cash from customers. The article also reports that "even" the laggard Federal reserve has gotten into the act, with a Fed spokesman announcing that dollar bills that circulated in Europe and Asia are being quarantined for 7 to 10 days as "a precautionary measure."
According to a 2017 study conducted in New York City, researchers found microorganisms living on the surface of cash, ranging from mouth and vaginal bacteria to flu-like viruses. The World Health Organization recommends washing your hands after handling money, especially before eating food.
It seems that a great many Americans pine for dictatorship. How else to explain the outrage over the fact that a member of Congress has requested that the Congress actually vote on the largest spending bill in human history? It seems the preferred method of lawmaking now is to have a small number of politicians decide law without the annoying formalities of legislative votes.
The current controversy centers on the fact that Rep. Thomas Massey from Kentucky things Congress should have a recorded vote on the massive kleptocratic bill currently working its way through Congress.
As it is, Washington's most powerful politicians want to use unanimous consent to pass the bill. This means a small handful of members of Congress can show up, say "aye" when prompted, and the bill will pass. Indeed, even if some members show up and say "nay," the chairman can still just declared the vote "passed" based on his or her own opinion of which way the voice vote went.
On other words, what Washington's "leaders" want is a rubber stamp.
And a rubber stamp legislature, something we have long seen in countless despotic regimes throughout history, is apparently what many Americans want.
One need only peruse the social media responses to Massie's opposition to a rubber stamp to see just how little respect there is for the concept of the rule of law. Many of the responses are repeatable here, but a they could certainly be said to be in line with John Kerry's intellectually stunted comeback: "Congressman Massie has tested positive for being an asshole."
Of course, who could expect anything more to the point than this. Obviously, people like Kerry aren't going to argue "I firmly believe members of Congress ought not be required to accountable for their votes." He won't say "the basic tenets of representative government mean nothing to me."
But that's what opposing Massie's effort means.
"Why, this is an emergency!" is the claim made by those who think it perfectly fine if a small group of millionaires passes legislation in the shadows — legislation designed largely to prop up the asset prices of billionaires so they can keep being billionaires. Meanwhile, regular people will get one or two month's worth of rent payments. And then they're on their own in the worst job market since the Great Depression.
Small and medium-sized business will suffer the worst, but the "good" news is billionaires will be able to use their new windfall to buy up the assets of small businesses while increasing the market share of America's mega firms.
Of course, if members of Congress cared anything at all about ordinary people, they'd be passing massive amounts of deregulation, and huge cuts to the government's regulatory agencies which have made the cost of doing business in America skyrocket in recent decades. They'd bring all the troops home, end all the wars, and use the savings to give Americans a tax cut. Such a move would greatly increase the ability of small firms to compete against the billionaires. It would make it easier for people to at least scratch out a living during these hard times we're now entering. It would allow markets to provide the sort of innovation and flexibility this country now badly needs.
But none of that will happen. The US government functions primarily under the delusion that "too big to fail" is a respectable governing strategy. Of course, if you're not too big to fail, you're out of luck.
But Congress has another reason why they shouldn't have to vote: they're too scared to emerge from their mansions and penthouses to show up in Washington to vote. They're afraid they might get sick. If this is really the case, it's hard to see how these people could function at all if they weren't already rich and powerful. They're fortunane they have underlings and staffers to run all their errands for them and protect them from the larger world. On the other hand, any member of Congress can easily avoid showing up for a recorded vote if it comes to that: resign immediately. They won't be missed.
The issue of whether government in America can quarantine persons against their will, ostensibly for their own health and that of others with whom they may come in contact, requires a dual analysis—one of the powers of the federal government and the other of the powers of the states. For constitutional analysis purposes, since local and regional governments derive their powers from the states in which they are located, the analysis of state powers pertains to them as well.
We begin our analysis with the observation of the truism that freedom is the default position. The language of the Declaration of Independence, as well as various amendments in the Bill of Rights, unambiguously reflects the view that those who wrote, ratified, and amended the Constitution recognized that our rights—to think, speak, publish, worship, defend ourselves, travel, own property, be left alone—are natural to our humanity.
These rights preexisted the government. Their source is our humanity. Government does not grant these rights. Rather its primary purpose—as stated in the Declaration of Independence, its sole purpose—is to protect these rights.
Though the courts have interpreted the Constitution to possess lamentable exceptions, the framers and ratifiers arguably accepted the nonaggression principle—articulated in the modern era by the late Professor Murray Rothbard—which declares that all aggression against persons and property, even by government, is immoral.
The federal government is one of limited, delegated powers. Of course, 230 years of legislation and litigation have blown its powers outside the confines of the Constitution and, invariably, in the direction of expanding federal power at the expense of personal liberty and of the states.
The states formed the federal government and not the other way around. Yet today, the feds stay in power by bribing the states with cash grants, the rich with bailouts, the middle class with tax breaks, and the poor with transfer payments. Notwithstanding all this, the courts continue to recognize the concept of personal liberty in a free society.
All this is background to the issue lurking beneath the headlines this week. Can the government quarantine people without proof of contagion and imminent assault? The short answer is no.
We know that under the Fifth Amendment if any government—state or federal—wants to impair the life, liberty, or property of any person, it must follow due process. Due process has two components—substantive and procedural. The substantive component asks if the impairment of liberty is proper to the government that seeks the impairment, and the procedural component asks if the impairment has come about fairly.
Now back to what the feds can do and what the states can do in a public health crisis. There are no emergency provisions or triggers in the Constitution; yet, Congress gave itself the power to regulate public health and safety under various pretexts. The pretexts exist because the nanny state urge of members of Congress to regulate is confronted by the reservation in the Tenth Amendment of health and safety to the states. Those pretexts are regulating commerce and all that affects commerce, and paying the states to do Congress’s will.
Stated differently, the Supreme Court has ruled that both the federal government and the states can confine a person who has not committed a crime, or one who has but has served their full sentence, in order to protect society from the person’s intentional or uncontrollable harmful tendencies.
It is contrary to the plain meaning of the Constitution for Congress to give itself powers that were not delegated to it by the Constitution, but the courts have permitted this. Yet even in the case of a lunatic who has committed a crime and served his full sentence but remains dangerous, the courts have recognized constitutional safeguards to protect his natural rights.
Now back to our question of whether the government—state or federal—can confine persons against their will in order to protect public health. The short answer is yes, but the Constitution requires procedural due process. That means a trial for every person confined.
Thus, a government-ordered quarantine of all persons in a city block or a postal code or a telephone area code would be an egregious violation of due process, both substantive and procedural. Substantively, no government in America has the lawful power to curtail natural rights by decree.
Procedurally, notwithstanding the fear of disease contagion, the states and feds may only quarantine those who are actively contagious and will infect others imminently. And it must present evidence of both at a trial at which it bears the burden of proof.
Although the nonaggression principle permits offensive aggression in self-defense when an attack is imminent and certain, that is a high standard for the government to meet, as it should be. Freedom—even the freedom of a madman or a dangerously sick and contagious person—is the default position. Infringing upon it without procedural due process is always constitutionally impermissible.
The Constitution was not written for the government to right every wrong. We know that government itself causes most wrongs—the theft of property by taxation, the impairment of economic liberty by regulation, the slaughter of innocents by war, the infringement of expressive liberties by majority vote. Yet the Constitution still mandates an exacting due process for all whom the government would restrain.
That means a trial before any quarantine, no matter the public danger, and a fair trial, not one animated by mass hysteria or government-generated fear.
In his magisterial Crisis and Leviathan, Robert Higgs shows that the growth of government in the twentieth century can largely be explained by patterns of crisis and response. These crises can be real (World Wars I and II, the Great Depression, stagflation) or imagined (inequality, the various isms). In either case new government programs, agencies, and policies are established, purportedly as temporary responses to the perceived emergency. But, as Higgs shows with rich historical detail, most of the temporary measures become permanent—either explicitly or in a revised form based on the original.
As I summarized Higgs’s thesis in an earlier paper:
Higgs (1987) noted that the expanded role taken on by the state during the New Deal period remained largely in place once the crisis passed, leading to a “ratchet effect” in which government agencies expand to exploit perceived short-term opportunities, but fail to retreat once circumstances change. Higgs (1987) suggests that government officials (regulators, courts, and elected officials), as well as private agents (such as business executives, farmers, and labor unions) developed capabilities in economic and social planning during crisis periods and that, due to indivisibilities and high transaction costs, tend to possess excess capacity in periods between crises. To leverage this capacity, they looked for ways to keep these “temporary” measures in place. Indeed, many New Deal agencies were thinly disguised versions of World War I agencies that had remained dormant throughout the 1920s—the War Industries Board became the National Recovery Administration, the War Finance Corporation became the Reconstruction Finance Corporation, the War Labor Board became the National Labor Relations Board, and so on. In many cases the charters for the New Deal agencies were mostly copied verbatim from World War I predecessors. Higgs’ (1987) ratchet effect illustrates that excess capacity in organizational capabilities isn’t necessary leveraged as soon as it is created, leading to smooth, continuous organizational growth, but may remain dormant until the right economic, legal, or political circumstances arise, leading to sudden, discontinuous jumps in organizational size or scope.
How will leviathan expand—temporarily and then permanently via the ratchet effect—in response to COVID-19? It’s too early to make any definite predictions, but we can make educated guesses based on experience and our knowledge of how governments work.
First, we can expect that government controls on travel and assembly will tighten. Whether via legislative approval, unilateral executive action, or judicial decree, the principle that governments must control movement and gatherings of people to prevent the spread of disease has been clearly established (or reestablished). As we know from Higgs’s work, the additional capabilities in this area acquired by the Centers for Disease Control and Prevention (CDC) and other agencies will likely be retained and put to use long after the crisis has abated. And further government intervention in the biomedical and healthcare sectors is virtually guaranteed.
The second likely long-term effect is ideological. Already we’re seeing the meme that the crisis has been caused (or at least exacerbated) by “neoliberalism”—that thanks to pervasive (?) libertarian ideology public health agencies were “hollowed out” and thus unable to respond in force:
Libertarians: Government sucks, let's hollow out the civil service— Avoid groups of people, wash your hands :rabbit2: (@Noahpinion) March 8, 2020
*Pandemic comes, hollowed-out civil service is unable to respond effectively*
Libertarians: See, told you government sucks
Of course, we know that in the US the CDC initially prevented private labs from testing or developing new tests without FDA approval. More generally, public (and private) health in the US, as in most countries, operates within a tangled web of federal, state, and local regulations, subsidies, restrictions, and other controls.
It is impossible to know how a free market medical system would handle something like corona. But we will be told that there are no free market enthusiasts during a pandemic (and that, at best, those of us who favor property rights, markets, and prices should embrace “state capacity libertarianism”). The case for markets will have to be made, as Mises would say, ever more boldly.