A Pandemic Trust Fund

The Coronavirus Pandemic may be the most warned about event in human history. Surprisingly, we even did something about it. President George W. Bush started a pandemic preparation plan and so did Governor Arnold Schwarzenegger in CA but in both cases when a pandemic didn’t happen in the next several years those plans withered away. We ignored the important in favor of the urgent.

It is evident that the US government finds it difficult to invest in long-term projects, perhaps especially in preparing for small probability events with very large costs. Pandemic preparation is exactly one such project. How can we improve the chances that we are better prepared next time?

In a short paper for the Center for Growth and Opportunity I offer a different funding mechanism to address the problem:

…we would like organizations tasked with protecting the public from low-probability, high-cost events to be funded on a permanent basis that is not subject to budgetary discretion or degradation. Instead of yearly appropriations, it’s preferable to have a one-time appropriation to finance a stream of investments. The financial means of doing this is to buy a bond with an earmarked revenue stream. That is, instead of selling bonds the government buys long-term safe bonds which pay out dividends that are earmarked to a program, in this case to pandemic preparation.

There is a well-known example of such a financing scheme, the social security trust fund. The social security trust fund was established in 1937. It buys long-term safe bonds that pay dividends that are used to finance social security payments. Unlike the pandemic trust fund I propose, the Social Security Trust Fund buys bonds on an ongoing basis but that is a relatively unimportant difference.

The Social Security Trust Fund buys the safest form of government bonds, which has given rise to a long-standing controversy over whether the trust fund is a “fiction.”10Of course, the trust fund is a kind of fiction but so are federalism, checks and balances, and the Constitution. Fictions can be powerful because they create shared understandings that govern behavior and determine equilibrium action. The trust fund does what it says—it increases trust by indicating that Social Security payments are higher in creditor priority than other spending. Just as Section 507 of the Bankruptcy Code increases trust by indicating that secured bondholders get paid before unsecured creditors such as a company’s suppliers. Since 1937, the Social Security Trust Fund has always held net assets, and when it briefly ran deficits in the 1970s and early 1980s, the Greenspan commission was established to shore up the system.11 That is, the simple existence of the Trust Fund as an accounting entity created an awareness, which made it easier to act to maintain the Fund.

A Pandemic Trust Fund would begin with a $250 billion investment in bonds earmarked to pandemic preparations. At current effective rates of interest of about 3%, this is enough to support spending of $7.5 billion annually.12 Note that $7.5 billion is nowhere near enough to address the current pandemic, but that is because we did not invest enough in pandemic preparation. Had we invested $7.5 billion in pandemic preparation every year for the last two decades, for example, we would be in much better shape today. The $7.5 billion is for annual ongoing preparation.

…A Pandemic Trust Fund invested in $250 billion of government bonds is an accounting fiction that may be readily agreed upon today at the height of the crisis because it has few current costs. Yet, as we have discussed, accounting fictions can have real power in changing the future allocation of resources.

Read the whole thing, it is also includes some interesting info on clever DOD contracts that have advanced pandemic preparations.


Bonds pay interest, not dividends.

How would an econ professor know that? Lay off the guy.

But as far as fiction writing goes, there's just no excuse for this kind of hyperbole:

>The Coronavirus Pandemic may be the most warned about event in human history.

This is a great way to write if you want to announce that you should not be taken seriously.

Dec 2, 2014, Obama, at the NIH, said:
"There may and likely will come a time in which we have both an airborne disease that is deadly. And in order for us to deal with that effectively, we have to put in place an infrastructure -- not just here at home, but globally -- that allows us to see it quickly, isolate it quickly, respond to it quickly. And it also requires us to continue the same path of basic research that is being done here at NIH that Nancy is a great example of. So that if and when a new strain of flu, like the Spanish flu, crops up five years from now or a decade from now, we’ve made the investment and we’re further along to be able to catch it."

Five years after Dec 2, 2014 was Dec 2, 2019, and the Trumpian mayor of Wuhan was, like you, denying the possibility of an airborne disease that is deadly.

For Trump in January 2020, he saw the possibility of an airborne disease that is deadly as impossible because Obama predicted it, and trump is the anti Obama.

I'm surprised Trump hasn't blamed Obama for engineering the airborne disease to be released just so his call for leftist big government spending could be justified.


Note, the funding Obama was seeking funded production of remdesivir, among others, which didn't work very well for Ebola, but does help limit the auto immune response called COVID-19. This funding was supplemental to funding for work that had its roots in the Bush administration anti terrorism programs circa 2003 spurred by both anthrax attacks and SARS-Cov. Bush administration created the disease threat intelligence to the national security daily briefing, which Trump eliminated as part of his Obama purge. But, the "Obama deep state" did predict the threat five years after Obama predicted an airborne disease in five years. But Trump rejected the possibility Obama could be correct in his prediction.

Don't be pedantic. Bond dividend is entirely standard usage. e.g. Bond Basics from Forbes.


"When you buy a bond, you are lending money to a company or government entity. In exchange, the borrower agrees to pay you a fixed rate of interest, known as a bond dividend."

If you tell the IRS your interest payments are really a dividend, what happens?

Probably nothing since the IRS is too overworked and underfunded to bother with trivialities.

Moreover, safe bonds have not paid interest much above zero for two decades now, and the Federal Reserve's plicies have created a financial system that will collapse if interest rates were ever to rise to significantly above zero. Since the Fed views its most important duty is to prevent the collapse of the financial system, it follows that we will never again see interest rates significantly above zero.
This is exacty the reason why the Social Security system and so many other public pension funds are underfunded. For decades their bonds have paid next to nothing in interest.
So how could the required programs be funded by bond interest?

Further to mine above, since the Fed's inflation target is 2%, to keep the real value of a $250 billion dollar fund of 3% 30-year treasury bonds stable at $250 billion effective value, the government would need to add $5 billion to the fund every year. The effective cash would not be $7.5 billion, but rather $2.5 billion. And that assume the 30-year bond yield avaeraging 3%. It will probably need to be less to prevent the collapse of the financial system.

So - would it be better to pay cash for a house in the USA?

a good idea for sure, but how will you feel when this same technology is used to make less important spending permanent? how about a trust fund to ensure that NPR never gets de-funded?

Right. Count me as one person who doesn't think the world is a better place because Social Security falls beyond the regular budgeting process. In fact, it's the main reason that we don't have sufficient resources for pandemic preparation in the sense that Social Security (and Medicare) crowd out all other potential government spending.

Should we also have a separate fund dedicated to Asteroid Preparation, EMP Preparation, Cyber-Attack Preparation,...

At least social security payments are limited to checks issued back to the public. What would public choice theory predict "pandemic preparation" spending could grow to encompass? The Green New Deal suggests that at least some congresspersons believe that "climate change preparation" includes economic security for people "unable or unwilling" to work. Based on the CARES Act, apparently most of Congress believes the same applies to pandemic preparation.

“ at least some congresspersons believe that "climate change preparation" includes economic security for people "unable or unwilling" to work.“

Unable vs unwilling: there’s a significant difference between these. I’d generally support assistance to the former, but only grudgingly support the latter.

NPR already has an endowment.

An endowment that is equilaterally covariable dependent on an existing cosine nodal spiral.

Sorry Charlie - the bot is much more entertaining, even when attempting the most sincere form of flattery..

I'm a bit surprised that Alex hasn't been demanding large-scale capital investment in asteroid collision prevention. It's low-probability but catastrophic. Where's the trust fund for that eventuality?

NASA already has an endowment.

There are giant swarms of locusts wreaking havoc in Africa and Asia. We need a famine fund too. We need one for every horseman of the apocalypse, especially me.

Who decides which business the government is going to underwrite and invest in? Opportunity for corruption. On the other hand, if there is a bidding market and open specs, not so bad.

However, the projects look like capital intensive ones, and we see that with the lack of ingredients, capital equipment stands idle, without, say, reagents. So, the investment would have to be down the supply chain as well.

Finally, these are long term investments in capital equipment, and technology changes. So, the government's investment in year 1 for equipment that will be obsolete in year 10 with a 25 year option to use doesn't make much sense

Why not private options to purchase goods or pandemic insurance policies offered by insurance carriers.

The benchmarks for pandemic preparedness are Taiwan, South Korea, Hong Kong, Singapore and maybe Japan. Start by doing what they do and fund these activities using a mechanism similar to what Alex suggests.

The military doesn't prepare for war by purchasing private options to purchase equipment when the time comes. It stockpiles equipment in advance. As goods and equipment gather dust and are at risk of becoming obsolete, they can be sold off or donated.

Show me where Taiwan, South Korea, Hong Kong and Singapore and Japan invested in companies to obtain an option for future purchases.

Provide links or specific information below.

I am in favor of stockpiling, using options to purchase. And, I am sure all those countries have done that.

Also, don't get me wrong. Am in favor of government investment in R&D activities. The government doesn't need to make a 25 year investment in 3m mask production facilities; it just needs to buy and store masks, and acquire options to purchase.

The masks, and most other products, have a limited shelf life.

Simple solution to that.
Sell from the stockpile before expiration to hospital that will immediately use and replenish with new stock.
In the food industry, food companies sell to restaurants items with a more recent expiry date because restaurants use rather than store products such as soon to expire milk.

Taiwan's biggest advantage was they were willing to close borders early and often. Jan 23 for a month, and then March 30 (and they are still closed).

When Trump applied the initial travel restriction, the response from the other side was "He's racist! Let's show this virus we're not afraid! Everyone take the subway to the lunary new year celebration this week!"

So, the first thing we could do that is free is close the border, and then have big cities with likely infected inhabitants go into a two week restriction period while we learn more.

Free, with no investment needed.

The second thing is constant benchmarking: See how long it takes teams inside gov to create real working tests (1M or more) for mundane flu and vaccine that isn't a danger. Nobody would use what was created. The only reason is to train so our teams can see what went wrong.

A much better response woudl have been:
1) President closes borders, cities follow suit immediately
2) Virus or flu is sequenced, and 1M tests are created in a week, 10M in a month
3) Cities open slowly as testing and tracing is applied
4) First vaccine is available in 2-3 months because of dramatically shortened cycles that have come from learning
4) Fed gov has website and database to allow online tracking of sick and contact tracing

The above doens't need much budget, and would permit a substantially better response that Taiwan.

The key is readiness: Teams that have done this over and over under extreme time pressures.

The "much better response" you describe is more or less exactly what the countries the countries I listed above have done, except for 2 and 4. Moreover, all have gotten away with restrictions on personal activities that are less onerous than those in place in much of the U.S. The travel restrictions are a secondary consideration and have typically been based on evidence: Taiwan, South Korea and Singapore, for instance, found at a certain point that a disproportionate number of new cases were imported.

But think how dysfunctional our democrats are: Trump closed borders, and the dem response was immediately to NOT do the right thing. Seattle had one KNOWN case within its borders on Jan 23, first deaths about 2 weeks later, and yet state didn't close until 6 weeks later, and only after all the tech companies shut down.

Our politicians, in order to show what a fool Trump was, delayed the correct response.

Yes, work is largely happening in Taiwan as we speak (I've been there hundreds of times and know the drills). The border is key. You can either shut borders and keep working OR you can keep borders open and suffer the consequences.

No one delayed decisions to spite Trump, that’s anonymous level Alex Jones shit

Pelosi said "“We want to be vigilant about what is out there in other places. We want to be careful about how we deal with it, but we do want to say to people ‘Come to Chinatown, here we are — we're, again, careful, safe — and come join us.'”

She said later the reason for saying this was "I thought it was necessary to offset some of the things the president and others were saying"

Is that not 100% clear? She encouraged people to congregate in massive groups during the early stages of a pandemic BECAUSE the president had put travel restrictions in place that she thought onerous and unnecessary. She said so many times. The #1 thing Taiwan did to control their outbreak Pelosi decided was stupid.

Now Trump says some dumb stuff. But in the background his preparations were the most early and the most solid of any politician. His stupid words are offset by shrewd action. Pelosi was doing NOTHING on preparation. Her stupid words stood there alone.

‘When Trump applied the initial travel restriction, the response from the other side was "He's racist! Let's show this virus we're not afraid! Everyone take the subway to the lunary new year celebration this week!"’

This is not true. For instance here is a comment from Democratic Senator Chris Murphy on February 5 on twitter: “Just left the Administration briefing on Coronavirus. Bottom line: they aren't taking this seriously enough. Notably, no request for ANY emergency funding, which is a big mistake. Local health systems need supplies, training, screening staff etc. And they need it now.“

People were warning about the threat in late January and early February including on the democratic side of the aisle. I’ve seen a faked tweet from Sen Schumer is typically passed around to support the claim that dems opposed the travel ban, so I assume there’s very little real evidence that they did since people are resorting to faked evidence.

And if the China travel ban was effective, there wasn’t actually any danger in going to a lunar new year celebration, so those two things don’t even go together. The latest genetic studies of the coronavirus indicate most of our epidemic was seeded from travelers to Europe and Egypt, not directly from China, so there was nothing particularly dangerous about Chinatown or a Chinese celebration taking place in the USA.

> Notably, no request for ANY emergency funding, which is a big mistake.

This is flat out wrong. Trump declared a health emergency on Jan 30 and indicated he'd be seeking $2B. On Feb 24, he sent a letter to Congress for $2.5B and on March 6 congress approved $8.3.

See my comment above on Nancy Pelosi telling everyone to congregate for LNY as a "counter" to Trump's border actions.

Trump may not have been taking it seriously enough, but he took it and has taken it far more seriously than any democrat. Even in mid March Biden was saying travel restrictions of any kind weren't needed. And the media was on board with that, like clockwork.

In retrospect, Trump should have closed the entire border (including EU) on Jan 23 the very second China closed theirs to Wuhan. And state govs in hotspots like Seattle and NYC, shoudl have shut down immediately. But in fact, our biggest "blue" govs didnt' shut down until 7 weeks after Wuhan closed.

If Seattle had closed on Feb 1, this would have had a very different trajectory. And if the US and Seattle had closed on Jan 23, it would be better still.

Step 1: have a small, homogenous nation-state (preferably east Asian) with authoritarian culture.

Lol. You’d be freer in Taiwan or South Korea than in the US.

There’s less of an “authoritarian culture” there than in the US

Or a large multicultural, open, representative democracy. That works too provided -- and this is important -- people in charge decide to take precautions, either because they are competent (NZ) or because they are incompetent but capable of accepting evidence when it is rubbed in their face (Australia).

Australia is 2X indonesia in terms of death rate. Are you saying they are even more competent and accepting of evidence?

Australia's death rate per million is 16% higher than in in Indonesia. Tomorrow Indonesia's rate will be higher. Given the average age difference it's clear a much larger portion of the Indonesian population has been infected than in Australia at its peak.

I don't know how competent the Indonesian response has been, but the degree of competence competence shown varies wildly between countries. For example, compare Australia and the US.

Yep, Indonesian death rate per capita is now a little worse than Australia.

Read the proposal again. He's not proposing that the government buy anything from anybody except itself. Which isn't really buying anything.

Thank you. I did read the proposal which had in it investment in companies to provide goods in the event of a pandemic. See examples of public private partnership in the paper re DOD. At the end of the paper, he came back to this again, and also though, as you point out, came back to a set aside for future events.

But, you don't need to do any of this> Ag programs are set out on FIVE year programs which have to be reauthorized. You can set out 10 year programs if you want, or contract in year one for delivery over a ten year period.

But were CDC.FDA's problems with lack of preparedness due to lack of funding? Or was it not being prepared, for example, to allow others to develop and use their own tests when many screening (in which the cost of false negatives is lower) as well as diagnostic tests or rapid deployment of medical devises would be needed. [Even this is assuming that maintaining a monopoly is optimal for "normal" times.]

They got bored of their real jobs so took on other missions that had nothing to do with public health, but were real woke. I can't say I've read anything in this proposal that would stop the same from happening.

Yes, you are correct. Organizations get bored with the original mission, and then seek to focus on the organization instead of the mission. There are groups of people that love the original mission. But as the bureaucrats move in, those that loved the mission but dislike the new culture leave, and even more bureaucrats move in to fill the void.

And then the bureaucrats need somethign to work on, but they arent' as smart as the people they pushed out. So, instead of going after the hard #1 through #5 problems ("Let's put a man on the moon!" or "Let's push the Nazis back in the battle of the bulge!") they instead focus on easy, but controversial problems so that it seems like they are doing a lot.

That is why our politicians these days focus on "Who is allowed to pee in this bathroom?" rather than "How can be get control of the debt?"

That is why NASA focuses on "More girls in science" rather than "Let's set up a base on the moon."

This is not a money problem at all. The only way you stop people from getting bored with a mission is to fill the ranks with those that love the mission and then train constantly towards that mission. See military and pro sports. The minute pro sports starts to wonder why Asians are 4.3% of our population but only 0.2% of our basketball teams we're in trouble. Because that means those that love the mission have all left.

Wokeness is a smoke signal that the institution you used to love has been overrun with crazies.

"This is not a money problem at all... See military and pro sports."

Right, two institutions awash with money are proof that you don't need money to accomplish truly difficult things. In inflation adjusted terms, NASA's budget is about half of what it was during the Apollo era. That is deliberately so: the expense of NASA was always controversial and Nixon slashed its budget once we had a few successful landings on the moon.

NASA's unmanned space probes add a lot of scientific value but they lack the high drama of manned expeditions outside of Earth's orbit. You can't blame NASA for being bored: they do real science but then are also expected to entertain school children with astronauts in the space station and otherwise engage in half-baked preparations for a manned Mars mission that's already been 30 years in the making and could well never happen within anyone's lifetime.

> but they lack the high drama of manned expeditions

The world was riveted to their screens watching SpaceX land their unmanned rockets on a barge.

> they do real science but then are also expected to entertain school children with

NASA has a budget of $20B a year. Over the last decade that is $200B. SpaceX made a re-usable rocket take off and land standing on a barge--a hugely significant milestone--for $1B total.

NASA has plenty of money. They decide themselves to spend that money on stupid stuff. That is because NASA doesn't hire hard core engineering types anymore. They instead hire woke-types, and the woke-types decide to put together programs to encourage girls to go into STEM.

And the hard-core engineering types at NASA look around and say "Nice, but I'm out. I see where this is headed" and NASA is left as a shell of woke types demanding even wokier actions. I mean, when are we going to have the first black trans immigrant astronaut?

In the end, the innovation has been drained from NASA 100% because of growing wokeness over the decades.

As I said: Orgs shift from focusing on the mission to focusing on the org. And as that transformation occurs, there's an inrush of wokes that see this as a power grab, and an outrush of tech types that don't have time for this crap--they want to shoot rockets into space.

And in the end, we get an org with a $20B annual budget that is effectively a lobbying arm for woke stuff. Same thing happened at the CDC you can be sure. You think our top thinkers are at the CDC? Hell no. The top thinkers left long ago to make some serious drugs and money for other people. The CDC is anymore a bunch of incompetent cheerleaders wondering why there aren't more women in science.

The Social Security Trust Fund does not make investments. Its only assets are government bonds, which means that the fund consists only of the government's promise to pay benefits. A real investment would give the government something to pay those benefits with. It's no different from someone making promises to pay himself money in the future and then claiming that the existence of that promise gives him a trust fund.

So this proposal is to have the government promise now to come up with money in the future if a pandemic occurs. And you even concede that this is a fiction, and defend it by saying that the fiction
"increases trust." Perhaps it does, but it does that by fooling people into thinking that it has "assets." A government's promise to pay itself money later on is not an asset.

"How can we improve the chances that we are better prepared next time?"

In hindsight, the best "preparation" that we could have done requires no spending at all:

(1) Limit the federal government's power to providing advice/guidance only on testing, not to prevent use of "unapproved" tests, which would have accelerated early testing. Lack of early testing is widely viewed as the number one thing that the government botched.

(2) Limit government at all levels to issuing guidance/advice only regarding best practices for limiting virus spread --- distancing, hand washing, cleaning surfaces, work-from-home if possible, no large crowds, etc. --- not to centrally plan the economy by picking and choosing which businesses to close. That would have limited the economic damage from senseless policies like prohibiting golf or lawn mowing. It also would have limited backlash that could actually lead to more infections and deaths.

What we've learned from the pandemic --- and the fact that many private entities enacted social distancing before the government acted --- is that government can play a positive role in disseminating guidance and information, which are classic public goods, but that government is not so good at central planning, pandemic or no pandemic.

Also, during declared emergencies, temporarily suspend all rules against "price gouging" to prevent shortages.

I interpret Tabarrok's summary to mean that no funds are actually deposited in the pandemic trust fund, it's only an accounting entry. That differs from the ss trust fund to which excess payroll taxes collected (i.e., the amount current payroll tax collections exceed current ss benefits paid). It's more than an accounting entry; indeed, it was and continues to be a fraud, a scheme to offset income tax cuts primarily for the wealthy with increases in the regressive payroll tax. There is no ss trust fund, just IOUs from the government. How will the government repay the IOUs when the government already has massive debt, which increases daily. What Tabarrok is proposing may not be as fraudulent as the ss trust fund but the intent behind it is essentially the same: to avoid income tax increases on the wealthy to fund the pandemic trust fund. What it does is acknowledge that the government debt will never be repaid because that's only possible if the wealthy pay much higher taxes, and we know that's not happening and I assume not something Tabarrok would support. So we adopt gimmicks that pretend to provide funding for what's urgent (in this case funding for the next pandemic). By comparison, the ss trust fund was worse than a gimmick for it included the largest working class tax increase ever, used to partially offset the income tax cuts adopted during the Reagan administration (and income tax cuts that would be adopted later during the GWB and Trump administrations). How large of an offset? Almost $3 trillion. We have left undone those things which we ought to have done; And we have done those things which we ought not to have done; And there is no health in us.

Judgment Day is coming; indeed, with massive unemployment and the collapse of payroll tax collections, Judgment Day is likely here. What is Judgment Day? The day when current ss benefits paid exceed current payroll taxes collected. Then what happens? Government can't pay ss benefits promised, not without another large regressive payroll tax increase. What about all those government IOUs, almost $3 trillion worth, held by the ss trust fund? Can't the trust fund sell some of the IOUs? I suppose it's possible for the trust fund to sell to sell government debt while the government itself is selling massive amounts of new IOUs to fund the massive debt being created as a result of the pandemic. Is there a limit on the amount of government debt the market can absorb? If there's a limit, would that limit apply to the debt held by the ss trust fund or to the newly created debt? Don't ask so many questions.

Ideally we'll shift away from financing retirement, medical and unemployment benefits with a tax on wages (Boo, Bismark and FDR) to a broader consumption tax like a VAT.

From Tabarrok's essay: "The trust fund does what it says—it increases trust by indicating that Social Security payments are higher in creditor priority than other spending." Well, I suppose that's the answer to my final question.

When push comes to shove, the niceties of creditor priority may be ignored. Ask GM bondholders how they fared in the 2009 bankruptcy.

This is clearly meant to be satire, now that the end is nigh - The Coronavirus Pandemic may be the most warned about event in human history.

"It is evident that the US government finds it difficult to invest in long-term projects, perhaps especially in preparing for small probability events with very large costs." We don't seem to have a similar problem with another low probability high-cost event--war or nuclear war. Why even if they are both low probability events, can we prepare for a war against a country but not a war against a virus? This question may provide some insight into how the federal government has responded to the threat of Covid-19.

"We" do have a problem preparing for war, if "we" means the West as a whole. They simply outsource it to the US security umbrella.

Obama asked all NATO countries to increase their defense spending to 2% of GDP. That was in response to Russia's Crimea adventure. They all agreed but did nothing, even during the good times which are now over.

In any case, mere spending is not the same as preparing. If war ever does come, the DoD will be as woefully unprepared as the CDC was, for all the money thrown at it. We'll "discover" that critical elements of the supply chain rely on China, sometimes through several levels of indirection.

Multi-trillion dollar deficits are incompatible with elevated defense spending. Covid will make China the sole global military superpower.

Nobody can credibly make long-term commitments. The US mostly just refuses to make them, which is at least honest; the Europeans do but never actually follow through. There are countless examples of the latter, whether it's Kyoto greenhouse gas emissions, NATO spending targets, or the long-forgotten fiscal criteria for introduction of the euro: budget deficits of less than 3% of GDP, debt of less than 60% of GDP.

Not a great time to talk about how many angels can dance on the head of a pin, imo.

If we cant manage an effective national response to the crisis we are in, how will we every manage hypothetical ones?

This is not all of us but it might be enough to spoil containment.

Everyone with a pulpit, from the top on down, should be using it to tell them to all go home, and commit to the national welfare.

Actually the evidence is pointing the other way. Closing parks and beaches might have been a mistake. In which case we should open them back up.


Huntington Beach can be nice on off-peak weekdays, but it's never not crowded in high season. Especially weekends.

So it's not a good match for the idea that parks can increase distance or reduce congestion.

And these are just freedom idiots increasing all our risk in the county. #MAGA2020, if you live that long.

How will this work in a negative interest rate environment? This seems to be where most developed economies seem to be headed and a very real possibility for the US as well.

PS, it was Bill Clinton who came up with the National Stockpile not Bush Jr.

"The SNS started as the National Pharmaceutical Stockpile in 1999 after President Bill Clinton directed $51 million to the Centers for Disease Control and Prevention to amass a supply of antitoxins and vaccines to combat a possible bioterror attack."


the nest thing to do would have been precisely nothing. Or very little, Sweden style, spending even more money funding future bureaucrats trying to justify their existence seems like a really bad idea.

here's a huge caution on that:


Does not seem to be the case with other coronaviruses. For instance SARS never made a comeback.

Sweden paid the ultimate price. With their lives.

Idiotic comment. So far 0.025% of Swedish popukation have died of Coronaviris. This is minuscule and is a lower percentage than in many counties that have locked down and they are well on the way to herd immunity.
You also realise that cancer testing is way down in lockdown countries and depression is way up. This lockdown will kill more people than it saves.

As I've suggested before, this looks like a Civil Defense issue. Civil Defense, as generally understood, is exactly preparation for potential future emergencies of this nature; e.g. earthquake, hurricane, virus, EMP, etc.

This would include at least
(1) stockpiling - MREs, medication, transformers, PPE, fuel, etc.
(2) making critical infrastructure (power, water, communications, transportation) more robust and resilient
(3) creating, training, and maintaining local and state capability (from Boy Scouts to churches, Coast Guard Auxiliary to Medical Auxiliary to National Guard)

There are a lot of best practices that can be put in place. Contraflow lanes for hurricane evacuation, solar power and hand pumps for gas stations, prepositioned supplies along evacuation routes and in evacuation areas ...

Some form of disaster / emergency happens often enough to provide some tether to the real world, but there is going to be, as with most large programs, a lot of waste, fraud, and abuse. The large Federal programs with daily use have that, and this won't be any better.

I'd suggest funding it as a percentage, say 2-5%, of the Defense Budget, and perhaps manage it through Defense. They probably have the best mindset for thinking about and actually preparing for catastrophic events, and those are the ones we should actually be most concerned about.

Those protestors have AR-15s. Maybe they can shoot the virus dead.

We have to first total up all the possible disasters we could face and price their long term preparation costs. If this is the right approach for pandemics, isn't it right for all major disruptive events? With global climate change rising sea level and major storm events will make many cities uninhabitable, will stimulate sudden migrations. With the increasing wealth gap, the majority of people could become marginalized and riot. When all possible major disruptive events are considered, can we afford this approach?

Here's a (semi-tongue-in-cheek) proposal of a similar idea:

Basically societies have a hard time being collectively rational about low probability high cost events, like pandemics and asteroid impacts. On the other hand they seem to irrationally love low probability high reward events. Combining the two, you could sustainably fund disaster protection.

Here's a later post with a more pessimistic take

There are a long list of 100 year or 200 events that are far more dangerous that the 100 year event we just suffered. This virus, really, was nothing. Everyone sat home on the internet. Imagine if there was no electricity? Or if there was no TV/internet. The outcome would have been dramatically different.

In 1700 a 9.0 earthquake hit the west coast (Cascadia earthquake). Today that would be a million dead immediately, and millions dead in the coming week

A nationwide power grid event could easily kill a million as people froze or baked due to not having electricity for an extended (1-3 weeks) period in large regions.

Regionally, we have huge cities that derive a significant (>50%) of their electricity from a single natural gas line. If that gas line is severed, the city loses it's ability to make electricity. If the gas line is damaged due to massive natural event and it cannot be repaired quickly, you will again see the body count climb quickly.

It's very easy to see multiple single events that are manageable occur together and create something disasterous. For example, in 2014, a mud slide north of Seattle resulted in mud a mile long and 50 feet deep being deposited throughout a valley. Had our main gas line been in that region (and it's not too far from that), then no electricity for Seattle. Lots dead.

If our aim to protect against a 100 year event, then there's not enough money even through bonds to do so. Earthquakes alone would suggest every building needed to be upgraded to handle an 8.0, which means most buildings in Seattle would need to be condemned.

And there are always plenty that will come out of the woodwork and claim "I've talked about this forever, I tried to warn everyone" regardless of the crises.

It is probably best to be "prepared to be" dynamic and responsive.

Rather than heavily invested in a bunch of fixed plans.

Still, it certainly doesn't hurt for everyone to pre-purchase their preferred staples, if those have long enough shelf life.

In most places, the water supply will fail shortly after the grid goes down. People will die in three days without water.

One observes that rather than encourage a more robust energy supply, many state governments are moving to impede and eventually prohibit natural gas pipeline construction, and eventually prohibit natural gas commercial and residential use. They are also pushing to eliminate nuclear plants, making their large urban areas even more reliant on remote power generation and long distance transmission.

The paragons of good government like CA, NY, and NJ seem particularly enthusiastic in this regard, but it’s one election away from being national policy.

Remember, in California we tried "nuclear in our backyard".

Humanity is doomed. It’s only a matter of time. But we can stave it off another thousand years or more with the right policy. Unfortunately, human nature seems to be to accelerate our demise.

Solar panels down to 20 cents a watt at the factory gate. Good news for distributed generation.

Panels without storage aren't very useful. And unfortunately, storage cost a fortune and needs to fall by to 1/5th of it's current price to be cost effective.

CAISO has shared lots of analysis showing what September afternoons would be like without fossil. Waning daylight, while it's still hot and lots running AC. And no wind. Plugging this gap with batteries wont' be cost effective for a long, long time.

CA is about 20-30GW of solar generation today, and to get rid of fossil means minimally they'd need 20X more solar optimistically. But CA is broke. They cannot even afford to trim trees from 100 year old power lines. they had to sell off ventilators for pennies on the dollar a few years back because money was so tight.

California has a per capita gdp of around $67,000.

> In most places, the water supply will fail shortly after the grid goes down. People will die in three days without water.

Yes agree. Coal plants routinely store 60-90 days of energy on site. Gas powered electrical generation has *SECONDS* to run if a gas line is ruptured.

The hidden problem is that there has been so little research into the transmission of respiratory viruses, even influenza, since the 1950s. The CDC and NIH-NIAID are all in on vaccines (technology), but put little effort into physical adaptation.

Physical adaptations with sanitation, hygiene, etc. were how humans got their first wins against disease. But we have lost "faith" in them? Look only to the Coca Cola company's disease spreading drink dispensers. A communal touch-screen to get your drink when you are just about to eat with your hands? Really? How's that working out now with all surfaces dripping with deadly virus (according to our fearful leaders)

While concern for life generally is perfectly natural, I'd have thought that having 8 billion people on the planet would mean you could relax and not have to worry so much about the subset of it that is human life. AT must be quite a "feeler."

This blog has started to seem very untethered from reality lately, and not because of the UFO postings.

I’m not worried about life. Short of an unthinkable cataclysm life will take care of itself.

I’m concerned about “the good life”. I want to eat escargot because it’s garlicky goodness not because I’m foraging near ditches. I want to drink wine (and not because I’m adding alcohol to water to kill pathogens).

Even a sensualist - and certainly anyone who ever judged anything on what is dismissively and incuriously called "aesthetic grounds" - would have a preference for the richness inherent in the natural world, not diminishment of it.

Maybe AT is too neurotypical for his blog.

When was that word first used? I think maybe we better quarantine it awhile until we have an idea what it means, if it means anything at all. Just to be on the safe side.

Clearly, the Pandemic Trust Fund should be started by a surtax on those who live in cities above a certain population density. Call it the "Irresponsible Crowding Level." Just add 3% to your Federal Tax.

Supplement it with a 10 cent tax every time some boards a subway.

Not a bad idea, Alex -- probably your best one in a long time!

Start the ICL fairly high, around 17K people per square mile, so that it initially affects only our most wantonly-reckless city dwellers. Then, decrease it by a few percent every year or two, to truly get us down to a sustainable level of urban selfishness by say 2040. (If this reminds you of the laudable carbon reduction efforts, why, you're right!!!)

These efforts may not be enough. Given that the pandemic is slaughtering Americans at much faster rates than, say, gun violence, we may need a bigger stick here. I'd suggest some kind of Mandatory Buyback plan for urban dwellings if a city fails to reduce its density fast enough.

If it saves just one life, it is MORE than worth it.

Your idea will end up with nursing homes hit with the biggest tax increases. Law of unintended consequences.

No, it will hit owners of zillion-dollar condos in NYC the hardest. Remember, this is a surtax -- if your federal tax is zero, your surtax is zero.

There are no flaws in this idea. Tyler -- contact me about Emergent Ventures funding for its promotion.

So disappointing to see so many bad ideas from people calling themselves economists. It’s McCrea’s I got obvious the whole profession has fallen to the level of irrelevance a of English, women’s studies, business, and black studies departments. There has been nothing left to say regarding economics since Buchanan. Everyone left has proven they are either outright captured by big business and the socialists or they are allowed to continue to due to their convenient opinions. There are too many examples to list them all and this post is a minor one but some of the bigger seem to be using an economic value of life in the millions and then multiplying by another average of proportion getting sick when almost everyone dying is living off taxpayers via social security and Medicare/Medicaid and have a negative economic value. Acting like the stimulus was a good idea when in reality it exacerbated youth unemployment and mostly went to big banks, hospitals that already get huge rents, and big corporations’ shareholders through mortgage and rent payments or outright bailouts. Ignoring the fact that the fed effectively owns Most private property. The obvious solidification of big tech’s integration with big government. The obvious power grab by politicians. The wrecking of our economy these people claim to understand. It’s time people who have actually had to make a dollar on their own instead of taking from those of us who have to take charge. We need outright revolution and a reversion to the pre-chevron, pre-Lochner constitutional framework before politicians and economists have another opportunity, another “recession” to commit another Genocide, steal what we have left, and potentially destroy the free world and end the human race.

It would be better to stockpile than to use a trust fund to purchase on the market at the time of crisis.


Ask yourself: What happened to the price of ventilators or masks or PPE during the crisis. They went up.

The trust fund would be chasing goods in short supply during a crisis.

Better to purchase and store.

Maybe we can store it near the Strategic Petroleum Reserves.

But, hey, why do we need the Strategic Petroleum Reserves We can just create a trust fund and purchase at the market price during an oil embargo or crisis in the Middle East.

The investment strategy would be to bet Black Swan. I am not skilled in betting Black Swan, but someone was, and made big bucks.

"President George W. Bush started a pandemic preparation plan and so...when a pandemic didn’t happen in the next several years those plans withered away"

Actually Bush the Lesser started two pointless wars with no clear endstate that are estimated to be around $7trillion plus now with no tangible benefits (except to some obvious 'industrial complex' industries) including any increase in perceptions of safety and are only continue via sunk costs.

Imagine what $7trillion+ could have done now?

How depressing that almost none of the comments are about the pro's and con's of the proposal, but cultural war posing and criticism thereof.

And how typical of MR comments in general. :(

Unfortunately the "effective" rate of 2.8% (not 3%) is not one you would earn on $250B today. It's a backward looking portfolio payout on the OASI. The $250B would be invested at today's rate of 0.75%. Annual income of $1.875B not $7.5B.

I agree that it is difficult for the US government to invest in long-term projects, perhaps especially in preparation for unlikely events at a very high cost. What we've learned from the pandemic --- and the fact that many private entities enacted social distancing before the government acted --- is that government can play a positive role in disseminating guidance and information, which are classic public goods, but that government is not so good at central planning, pandemic or no pandemic.

Comments for this post are closed