John Hood: Virus response fits government’s role
RALEIGH — I am a conservative who seeks to expand freedom and limit government. In most circumstances, there is an inverse relationship between the two. When government grows in size and scope, it must either collect more taxes or issue more regulations. Both restrict the freedom of individuals to make their own choices about how to use their own resources to advance their own goals.
To be a limited-state conservative is not to be an anarchist, however. Civilization requires government. It performs certain tasks that private institutions, based on mutual consent and explicit contracts, cannot adequately perform. One of them is to coordinate public response to communicable disease.
The outbreak of coronavirus disease (COVID-19) in China, and its subsequent spread around the globe, have produced serious consequences — medical, social, and economic. Thousands have already died, including dozens in the United States. Many more are seeking testing and treatment, putting tremendous strain on hospitals and clinics.
More broadly, a combination of prudence and panic has produced a wave of postponements, cancellations, and pullbacks, threatening bottom lines in such industries as travel, hospitality, education, and business services. Stocks have taken a nosedive. Growth in real output may well follow, at least in the short run.
Responding to such events is a core function of government in a free society. Property rights and voluntary exchange are insufficient barriers to bacteria and viruses. That’s why states and localities must concern themselves with sanitation, information campaigns, testing, and other public-health interventions, including measures such as quarantines in extreme cases. I think the federal government should play at most a research and coordination role here, although I know that goes against the grain of our increasingly nationalized political discourse.
When it comes to the social and economic costs, there may also be legitimate governmental responses. Still, in my view, they should be cautious and not overly prescriptive. Government planners at every level — national, state, and local — may have an abundance of good intentions. But they have an inevitable shortage of good information. And acting precipitously on it can create actual shortages of critically needed supplies and equipment.
For example, when on Tuesday Gov. Roy Cooper declared a state of emergency in North Carolina, some immediately demanded that the state enforce “price gouging” laws on the sale of hand sanitizers, masks, and cleaning sprays. That’s a foolish and dangerous idea. The likeliest outcomes will be bigger and more-persistent shortages, because suppliers will send their products to places where they will earn a higher return on their investment.
With regard to fiscal policy, the good news for North Carolinians is that if the economic dislocations and financial instability provoked by the COVID-19 outbreak result in recession, our state government is better prepared to weather the storm than in the past. With nearly $1.2 billion in its rainy-day fund, more than $600 million in Medicaid reserves, and about $2.5 billion in the state General Fund’s unreserved credit balance, a recessionary hit to revenue collections and recessionary boost to spending obligations won’t squeeze North Carolina as hard as they will other states.
