One outcome of the COVID-19 pandemic and resulting economic shutdown is something I never would have thought possible 45 days ago.
I have developed sympathy for politicians.
Politicians of every stripe: federal, state, local, Republican, Democrat — makes no difference. I feel sorry for these people.
They may or may not have seen this coming, but they weren't ready for it — to be fair, NOBODY was prepared for it — and now they have to make some incredibly tough decisions between two impossible alternatives.
Alternative No. 1: One million or more deaths nationwide from the coronavirus.
Alternative No. 2: A lengthy and total economic shutdown with perhaps 12% to 15% unemployment (about on par with the Great Depression, for you history buffs out there), a spike in crime rates and millions of small-business bankruptcies.
It's no secret that politicians of all stripes hate making tough decisions. Today they have no choice. There are no meaningful compromises between these two extremes. Whatever they decide to do in the coming months, they will have to face the consequences.
Whenever you try to predict the future, you always end up putting your foot in your mouth. But I think one prediction is fairly safe. The road to recovery from the pandemic will take place in three broad stages, as follows:
— Stage I: total lockdown until hospitals and other health care providers are ready to handle large numbers of patients.
— Stage II: limited resumption of business activity but a continued ban on large gatherings (concerts, theaters, restaurants over X patrons) and continued use of precautions (6 feet of separation, masks, hand-washing, etc.).
— Stage III: full resumption of business activity once experts are satisfied the epidemic has worked its way through the U.S. population and is on the decline.
Stages I and II may repeat until the virus passes through the U.S. population.
Right now we're in Stage I, which is exactly where we should be until our health care system can cope with the large and fast-growing number of COVID-19 infections we have seen over the past weeks. The scales should be tipped in favor of preserving human lives and minimizing deaths.
But sooner or later, as the economic pain of the shutdown becomes unbearable, the pressure on government to begin resuming at least some economic activity will overwhelm, and we will transition to Stage II. How soon it will take to get there is beyond me, but I'm already seeing signs of heavy government lobbying in my home state of Connecticut from restaurant trade groups and other organizations whose members have been hit hardest by the shutdown.
If the transition to Stage II causes the infection and death rates from COVID-19 to spike, the pendulum will switch back again, and government will reimpose shutdowns and social distancing rules.
The great likelihood right now is that for the next few months, we will be pingponging between Stage I and Stage II, hopefully with ever-shorter Stage I lockdowns each time, until we reach the equilibrium of Stage III and some semblance of normal life can resume.
Make no mistake; getting to Stage III may well take a year or two, until a viable vaccine for the coronavirus can be developed, tested and made available to Americans.
As a small-business owner, your goal at this point should be to do everything you can to stay alive until July 4, 2020. We may not be out of danger by then, but three things are probable:
1) The risk of infection will be lower, both because of people's self-quarantining and predictions that the virus will be less transmittable during the warm summer months (see the NPR article headlined "Can Coronavirus Be Crushed By Warmer Weather?"), encouraging more people to get outdoors and patronize local businesses.
2) We will likely be in some version of Stage II with some limited economic activity.
3) Having caught up on testing, we will know much more than we do today about how the disease runs its course and should be in a much better position to predict a return to normal economic activity in Stage III.
In the longer term, you need to think about putting some things in place so you will be better prepared to weather the next economic storm. Specifically, you need to do the following:
— Establish a cash reserve equal to six months' basic operating expenses (an immediately accessible interest-bearing account).
— Speak to your bank about a $50,000 line of credit (or home equity line of credit).
— Apply for three credit cards you never intend to use.
— Sign up for business interruption insurance.
— Diversify your supply chain so you're not as dependent on a single source.
Take a few minutes out of your life and reread the classic Aesop fable "The Grasshopper and the Ant." Thinking like a grasshopper got you into the situation you're in right now. Thinking like an ant going forward will help you survive and grow in the coming months.
Good luck to all my readers in these difficult times.
Cliff Ennico ([email protected]) is a syndicated columnist, author and former host of the PBS television series "Money Hunt." This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our webpage at www.creators.com.
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