To Confront Coronavirus, We Need an Emergency Wealth Tax

It’s very hard to predict how long the coronavirus is going to be with us and how much money is going to be needed to defeat it.

The number of confirmed cases in Italy, Spain, the U.K., the United States and Iran are all on the same exponential growth trajectory; they have just started their first infections on different dates.

The easiest way to describe how steeply cases are accelerating is to say that, generally speaking, each country at least doubles its number of cases every four days.

In the early days, watching the number of cases increase from 100 to 200 over four days may not seem that extreme. But, if it continues doubly every four days, eventually the number of cases goes from 2 million to 4 million to 8 million to 16 million to 32 million, all in just a span of 16 days.

At this rate, the United States, with its more than 59,500 cases today will have over 6 million cases one month from today and all 330 million Americans will have been infected within two months from today. You can imagine the strain that will put on our people, our health care system and our economy very quickly. And it is not beyond the realm of possibility to think that 1 percent of all the infected will die.

Already, with more than 59,500 cases confirmed in the U.S., hospitals, nurses and doctors are reporting they are running out of hospital beds, ICU beds, ventilators, face masks, test kits and protective clothing. And if our health care workers lack proper protection equipment for themselves, we may lose many of them from the workforce, making care of our citizens impossible.

These numbers confirm that this is a true global crisis and that we have no time to spare.

Unfortunately, we wasted more than two months at the start of this crisis. Our efforts should have begun January 3, when we first understood how contagious and deadly this virus was in China. Instead, as CNN’s “Mid-Morning News” pointed out on March 12, at that date only about 11,000 people total had been tested for the virus in the U.S., whereas South Korea was testing about 10,000 individuals per day.

I believe our only hope is an extended lockdown (more rigid than the “stay at home” orders being implemented in New York and California) where all nonessential workers remain in their homes and all nonessential businesses shut down. Our borders would have to be closed. No testing would be needed as all would be quarantined. The sickest would be moved into hospitals, but everyone else — healthy, infected with no symptoms and infected with minor symptoms — would be quarantined in their homes with no more than four or five persons housed together.

On a small scale this has already been done effectively. The 3,000-person village of Vo, Italy, implemented this strict quarantine one month ago and is now completely virus-free.

From an economic perspective, we would be shutting down capitalism, trade and the global economy for at least one month. There is no guarantee that the economy would quickly bounce back from such a hiatus, but if we take less drastic measures, there is almost no chance the economy could recover from a 12- or 18-month hiatus, which is the time frame needed to develop and test a vaccine.

It’s not impossible for economies to successfully shut down for a month. Any tourist to Paris, France, in August will see all the businesses shuttered and all the employees on vacation for the entire month. And yet the economy jumps back to full production immediately on September 1.

The question is how to minimize the economic costs to the planet’s people and businesses from such a long holiday.

It would be wise to eliminate all rent payments due during the month. To protect individuals, landlords and businesses, all interest payments on all personal and corporate debts would be permanently forgiven. Debt and equity investors might lose 3 percent to 5 percent of their investments, but this is tiny compared to the close to 30 percent decline in value already lost in the stock market.

Meanwhile, every adult worldwide should receive a one-time stipend of $2,000 for the month to cover food and utilities which could be adjusted to reflect the cost of living in each country.

This works out globally to close to $9 trillion. Most of the world’s governments and banks are already highly leveraged with debt. So, it raises the question, where would the money come from?

Cumulatively, the bottom half of all U.S. families today have close to zero net wealth, so they can’t be taxed to pay for this. This lack of savings did not result from profligate spending or a lack of planning or a lack of a desire to save for their families.

It happened because inequality exploded in the U.S. and many other countries of the world with hourly workers not seeing a real increase in wages for more than 30 years. Some blame automation displacing workers’ jobs for this wage stagnation. Not me. To me, it is obvious that U.S. wages cannot increase as U.S. factories are moving to poor countries with dollar-an-hour wages.

Governments of the world are also highly leveraged with debt, so if they borrowed these additional funds, their government deficits may explode, forcing them to print new currency to pay their bills, causing increased inflation and interest rates and prolonging the global recession/depression. The U.S. government is already running a trillion-dollar annual operating deficit which will certainly at least double as tax receipts plunge due to this virus-caused recession.

I think we have to get the money from those who have it, the wealthiest 10 percent of people in the world. A one-time 3 percent wealth tax on the planet’s richest citizens would provide the $9 trillion needed to implement this emergency plan.

To demonstrate that this idea might have broad support, I connected with Peter Fahey, a wealthy retired partner of Goldman Sachs and now a philanthropist and private investor. To my knowledge, he is the first Wall Streeter to embrace the idea of a wealth tax to address the costs of confronting COVID-19.

Here is what Fahey had to say:

The central deficiency of capitalism in the 21st century is high inequality/low economic mobility. This deficiency has now been compounded by: a) the 2017 tax cuts during an economic boom when fiscal deficits were already ballooning, and b) the drastic fiscal measures that will need to be taken to deal with COVID-19. Raising revenue from the wealthiest of our citizens is compelling, and now perhaps practical…. Now the aforementioned factors (a) and (b) will also leave the government of the richest country in the (history of the) world in financial shambles. I believe that the present circumstances present the opportunity to organize a core group of thoughtful, patriotic billionaires to step forward and state their eagerness to subject themselves and present and future peers to the equivalent of a substantial wealth tax to address the Federal budget crisis that will emerge from the COVID-19 crisis. If the subjects of such a tax stated their eagerness to rescue the economic system under which they so benefitted, how could the politicians refuse? “Never let a good crisis go to waste!”

In a truly moral society, the rich would be volunteering to contribute a small percentage of their savings to ease the hardship of the most affected and minimize the global suffering and death.

I have no confidence the wealthy will volunteer to contribute such sums. So, we need to rally mass pressure to impose a national or global one-time 3 percent wealth tax on the top 10 percent of the wealthiest people in the world to raise the required $9 trillion to implement this plan globally. Big problems require big solutions.