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Powell: 'Not the time' to worry about debt

Jerome Powell, the Federal Reserve chair, recently expressed regret about America's failure to get its debt situation under control years ago.

"It tells you the importance of getting your fiscal house in order," Powell said during a press conference last week. "Ideally, you would go into an unexpected shock like this with a much stronger fiscal posture."

Yet Powell urged politicians not to worry about that now. "This is not the time to let that concern, which is a very serious concern, get in the way of us winning this battle," he said.

Worries about debt forced the United States to rein in spending shortly after the Great Recession a decade ago. Economists say that premature withdrawal of stimulus hobbled the economy.

"The anemic recovery was a direct result of not enough fiscal stimulus," said Kristina Hooper, chief global market strategist at Invesco.

The national debt has been on an unsustainable path for decades, in large part because of high entitlement spending on Social Security and Medicare.

Before the pandemic, Moody's forecast US debt would hit 100% of GDP in 2030. Now, it expects debt to stand at 128% of GDP by then.

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Posted by Erin Burnett to ANT at May 6, 2020 at 7:40 PM

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'Absolute necessity'

But for now, the focus is on keeping American businesses and households afloat. In March, Congress passed a $2.3 trillion stimulus package, the largest in US history. Half a trillion dollars of forgivable loans have been handed out to small businesses. Direct payments were made to low- and middle-income families.

The Congressional Budget Office expects the federal budget deficit will hit $3.7 trillion this year, up from an eye-popping $1 trillion in 2019.

And more stimulus is likely coming, perhaps another $2 trillion later this year, to help out states and local governments battered by the crisis.

All of this will add yet more debt to the pile. But there's no other viable option to stave off further crisis.

"The fiscal stimulus and resulting explosion of the deficit is an absolute necessity to combat the devastating impact from the economic shutdown and to avoid a second depression," said Steven Oh, global head of credit and fixed income at PineBridge, an investment firm that manages $101 billion.

Spiking deficits are also the result of a dramatic loss of tax revenue caused by the shutdown of businesses and 30 million Americans out of jobs.

The federal deficit is expected to hit 18.4% of GDP in 2020 and decline only gradually over the next decade, according to Moody's Investors Service.

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Posted by Erin Burnett to ANT at May 6, 2020 at 7:39 PM

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The US is becoming the king of debt. It's a necessary risk

President Donald Trump is living up to his self-given nickname "King of Debt." On his watch, the United States has borrowed aggressively -- during the good times, and now the bad times.

Instead of whittling down the federal deficit when the economy was strong, Trump directed the federal government pile on even more debt to pay for massive tax cuts and spending surges.

That meant that the United States entered this crisis in rough financial shape. Debt-to-GDP stood at nearly 80% even before the coronavirus pandemic struck -- a rate more than twice as high as the historical average and double the level before the Great Recession.

Now, the national debt is exploding because Washington is being forced to rescue the US economy from its greatest shock ever. The Treasury Department said this week it will borrow $3 trillion this quarter alone. That's nearly six times the previous record, which was set in 2008.

Still, while the national debt is scary -- it now stands at nearly $25 trillion -- now is not the time to cut back on the borrowing.

Economists agree that the United States must continue to rack up debt to prevent a full-blown depression. Otherwise, there won't be much of an economy left to repay the debt once the health crisis is over.

Even deficit watchdogs are urging Uncle Sam to keep borrowing.

"We made a huge mistake being so in debt when the economy was strong," Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, told CNN Business. "But just because we were reckless and foolish going into the crisis, [that] doesn't mean we shouldn't borrow during it."

Of course, there will be long-term consequences for the mountain of debt Washington is racking up. Eventually it will mean higher interest rates, hotter inflation and likely higher taxes.



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Posted by Erin Burnett to ANT at May 6, 2020 at 7:38 PM

[The Global Outbreak] New comment on Simeon Courtie Says Coronavirus Vaccine Could Be R....

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In the short term, Nabarro says a vast program of testing and contact tracing would need to be implemented to allow life to function alongside Covid-19 -- one which dwarfs any such program ever established to fight an outbreak, and which remains some time away in major countries like the US and the UK.
"Absolutely critical is going to be having a public health system in place that includes contact tracing, diagnosis in the workplace, monitoring for syndromic surveillance, early communication on whether we have to re-implement social distancing," adds Hotez. "It's doable, but it's complicated and we really haven't done it before."

Those systems could allow for some social interactions to return. "If there's minimal transmission, it may indeed be possible to open things up for sporting events" and other large gatherings, says Hotez -- but such a move would not be permanent and would continually be assessed by governments and public health bodies.
That means the the Premier League, NFL and other mass events could go ahead with their schedules as long as athletes are getting regularly tested, and welcome in fans for weeks at a time -- perhaps separated within the stands -- before quickly shutting stadiums if the threat rises.
"Bars and pubs are probably last on the list as well, because they are overcrowded," suggests Neal. "They could reopen as restaurants, with social distancing." Some European countries have signaled they will start allowing restaurants to serve customers at vastly reduced capacity.
Restrictions are most likely to come back over the winter, with Hotez suggesting that Covid-19 peaks could occur every winter until a vaccine is introduced.
And lockdowns, many of which are in the process of gradually being lifted, could return at any moment. "From time to time there will be outbreaks, movement will be restricted -- and that may apply to parts of a country, or it may even apply to a whole country," Nabarro says.

The more time passes, the more imposing becomes the hotly debated prospect of herd immunity -- reached when the majority of a given population, around 70% to 90%, becomes immune to an infectious disease. "That does to some extent limit spread," Offit says -- "although population immunity caused by natural infection is not the best way to provide population immunity. The best way is with a vaccine."
Measles is the "perfect example," says Offit -- before vaccines became widespread, "every year 2 to 3 million people would get measles, and that would be true here too." In other words, the amount of death and suffering from Covid-19 would be vast even if a large portion of the population is not susceptible.
All of these predictions are tempered by a general belief that a vaccine will, eventually, be developed. "I do think there'll be vaccine -- there's plenty of money, there's plenty of interest and the target is clear," Offit says.
But if previous outbreaks have proven anything, it's that hunts for vaccines are unpredictable. "I don't think any vaccine has been developed quickly," Offit cautions. "I'd be really amazed if we had something in 18 months."

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Posted by Erin Burnett to The Global Outbreak at 3 May 2020 at 08:12

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What life without a vaccine looks like

If a vaccine can't be produced, life will not remain as it is now. It just might not go back to normal quickly.
"The lockdown is not sustainable economically, and possibly not politically," says Neal. "So we need other things to control it."
That means that, as countries start to creep out of their paralyses, experts would push governments to implement an awkward new way of living and interacting to buy the world time in the months, years or decades until Covid-19 can be eliminated by a vaccine.
"It is absolutely essential to work on being Covid-ready," Nabarro says. He calls for a new "social contract" in which citizens in every country, while starting to go about their normal lives, take personal responsibility to self-isolate if they show symptoms or come into contact with a potential Covid-19 case.

It means the culture of shrugging off a cough or light cold symptoms and trudging into work should be over. Experts also predict a permanent change in attitudes towards remote working, with working from home, at least on some days, becoming a standard way of life for white collar employees. Companies would be expected to shift their rotas so that offices are never full unnecessarily.
"It (must) become a way of behaving that we all ascribe to personal responsibility ... treating those who are isolated as heroes rather than pariahs," says Nabarro. "A collective pact for survival and well-being in the face of the threat of the virus.
"It's going to be difficult to do in poorer nations," he adds, so finding ways to support developing countries will become "particularly politically tricky, but also very important." He cites tightly packed refugee and migrant settlements as areas of especially high concern.


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Posted by Erin Burnett to The Global Outbreak at 3 May 2020 at 08:12

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Plan B

If the same fate befalls a Covid-19 vaccine, the virus could remain with us for many years. But the medical response to HIV/AIDS still provides a framework for living with a disease we can't stamp out.
"In HIV, we've been able to make that a chronic disease with antivirals. We've done what we've always hoped to do with cancer," Offit says. "It's not the death sentence it was in the 1980s."
The groundbreaking development of a daily preventative pill -- pre-exposure prophylaxis, or PrEP -- has since led to hundreds of thousands of people at risk of contracting HIV being protected from the disease.
A number of treatments are likewise being tested for Covid-19, as scientists hunt for a Plan B in parallel to the ongoing vaccine trials, but all of those trials are in very early stages. Scientists are looking at experimental anti-Ebola drug remdesivir, while blood plasma treatments are also being explored. Hydroxychloroquine, touted as a potential "game changer" by US President Donald Trump, has so found been found not to work on very sick patients.
"The drugs they've chosen are the best candidates," says Keith Neal, Emeritus Professor in the Epidemiology of Infectious Diseases at the University of Nottingham. The problem, he says, has been the "piecemeal approach" to testing them.

"We have to do randomized controlled trials. It's ridiculous that only recently have we managed to get that off the ground," Neal, who reviews such tests for inclusion in medical journals, tells CNN. "The papers that I'm getting to look at -- I'm just rejecting them on the grounds that they're not properly done."
Now those fuller trials are off the ground, and if one of those drugs works for Covid-19 the signs should emerge "within weeks," says Neal. The first may already have arrived; the US Food and Drug Administration told CNN it is in talks to make remdesivir available to patients after positive signs it could speed up recovery from the coronavirus.
The knock-on effects of a successful treatment would be felt widely; if a drug can decrease a patient's average time spent in ICU even by by a few days, it would free up hospital capacity and could therefore greatly increase the willingness of governments to open up society.
But how effective a treatment is would depend on which one works -- remdesivir is not in high supply internationally and scaling up its production would cause problems.
And crucially, any treatment won't prevent infections occurring in society -- meaning the coronavirus would be easier to manage and the pandemic would subside, but the disease could be with us many years into the future.

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Posted by Erin Burnett to The Global Outbreak at 3 May 2020 at 08:10

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When vaccines don't work

In 1984, the US Secretary of Health and Human Services Margaret Heckler announced at a press conference in Washington, DC, that scientists had successfully identified the virus that later became known as HIV -- and predicted that a preventative vaccine would be ready for testing in two years.
Nearly four decades and 32 million deaths later, the world is still waiting for an HIV vaccine.
Instead of a breakthrough, Heckler's claim was followed by the loss of much of a generation of gay men and the painful shunning of their community in Western countries. For many years, a positive diagnosis was not only a death sentence; it ensured a person would spend their final months abandoned by their communities, while doctors debated in medical journals whether HIV patients were even worth saving.

The search didn't end in the 1980s. In 1997, President Bill Clinton challenged the US to come up with a vaccine within a decade. Fourteen years ago, scientists said we were still about 10 years away.
The difficulties in finding a vaccine began with the very nature of HIV/AIDS itself. "Influenza is able to change itself from one year to the next so the natural infection or immunization the previous year doesn't infect you the following year. HIV does that during a single infection," explains Paul Offit, a pediatrician and infectious disease specialist who co-invented the rotavirus vaccine.
"It continues to mutate in you, so it's like you're infected with a thousand different HIV strands," Offit tells CNN. "(And) while it is mutating, it's also crippling your immune system."
HIV poses very unique difficulties and Covid-19 does not possess its level of elusiveness, making experts generally more optimistic about finding a vaccine.

But there have been other diseases that have confounded both scientists and the human body. An effective vaccine for dengue fever, which infects as many as 400,000 people a year according to the WHO, has eluded doctors for decades. In 2017, a large-scale effort to find one was suspended after it was found to worsen the symptoms of the disease.
Similarly, it's been very difficult to develop vaccines for the common rhinoviruses and adenoviruses -- which, like coronaviruses, can cause cold symptoms. There's just one vaccine to prevent two strains of adenovirus, and it's not commercially available.
"You have high hopes, and then your hopes are dashed," says Nabarro, describing the slow and painful process of developing a vaccine. "We're dealing with biological systems, we're not dealing with mechanical systems. It really depends so much on how the body reacts."
Human trials are already underway at Oxford University in England for a coronavirus vaccine made from a chimpanzee virus, and in the US for a different vaccine, produced by Moderna.
However, it is the testing process -- not the development -- that holds up and often scuppers the production of vaccines, adds Hotez, who worked on a vaccine to protect against SARS. "The hard part is showing you can prove that it works and it's safe."

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Posted by Erin Burnett to The Global Outbreak at 3 May 2020 at 08:09