Monday, March 23, 2020

Coronavirus - finance

I wrote the following three days ago elsewhere:

Trump-Mnuchin, Sen. McConnell, and Sen. Schumer have all proposed "stimulus" plans in response to financial hardships due to the coronavirus.

Relying on the news stories I have seen, Trump-Mnuchin's plan is stupid in my opinion. It pays everybody and hence is far off-target. Why send $1,000 to Warren Buffett, Bill Gates, Jeff Bezos, the Clintons, or even me? Why send $1,000 to people who are retired, people who still have good paying jobs, or are wealthy? Sen. McConnell's plan is quite a bit better. His plan gives $1,200 to singles with 2018 adjusted gross income (AGI) < $75,000 and married filing jointly couples with 2018 AGI < $150,000. It gives $0 to singles with 2018 AGI > $99,000 and married filing jointly couples with 2018 AGI > $198,000. However, the link between 2018 AGI and current financial difficulty is weak. While Sen. Schumer's plan lacks detail, I believe his basic idea of expanding unemployment compensation is far more on-target -- people who were employed, but lost their jobs due to the coronavirus. Many of them were in low-paying jobs that were hit hard, e.g. at restaurants. His plan is probably slower to implement, but its aim is far better. 

Since then I have learned some more details about McConnell's proposal. For low income folks the amount could be less than $1,200 and as low as $600. Also, any amount received could result in a lower tax refund after 2020. Finally, the IRS lacks the ability to act quickly or accurately. It will not be able to send so many payments as quickly as the pols want, and will make plenty of mistakes in the process (link).

Bernie Sanders wants to outdo both Trump-Mnuchin and McConnell (link). The latter two proposals of $1,000 or $1,200 stipulate a one-time event, with maybe a repeat later, e.g. in a few months. Bernie Sanders wants to give everybody -- no income test -- $2,000 "each month for the duration of this pandemic!" I thought he hated billionaires. Why does he want to start handing Bill Gates, Warren Buffett, Jeff Bezos, Mike Bloomberg et al $2,000 per month? The dictator-wannabe fascist shows total ignorance about producing and market distribution of goods or services and the skills and efforts needed to run a business. He often condemns profit like it is the root of all evil, and fails to understand that his salary as a Senator and his book royalties are or nearly are also 100% profit (since the costs incurred to obtain them are zero or negligible).

Elon Musk has said he could convert part of his business to produce ventilators and masks to deal with the pandemic. He has talked with Medtronic (symbol MDT), a maker of medical devices about ventilators and respirators. Suppose Musk's business or Medtronic do achieve said production. (Medtronic has already increased its ventilator production by more than 40%, and is on track to more than double its capacity in response to demand triggered by COVID-19. Link.) If revenues minus costs < 0, would Bernie Sanders say that is morally acceptable, even heroic? However, if revenues minus costs > 0, would Sanders say it is evil? Suppose an anti-coronavirus drug or combination of drugs is found that saves millions of lives and results in a drug manufacturer getting millions of dollars in revenue. Ditto for a vaccine. A big part of costs would likely be unclear. Regardless, I pose the same questions to Bernie Sanders. 

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