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Authored by Mike Shedlock via MishTalk,

Illinois pension plans are in serious trouble. So serious, the states seeks a federal bailout. Cities are in trouble too!

The president of the Illinois State Senate seeks $40 billion to help the pension system, fund unemployment insurance and aid hospitals and cities according to the New York Times. 

The letter, sent this week by State Senator Don Harmon, also seeks a $15 billion grant to “stabilize the state’s budget,” $9.6 billion in direct aid to Illinois’s cities, $6 billion for the state’s unemployment insurance fund, and hardship money for hospitals and nursing homes, among other things.

Messages left for State Senator Bill Brady, the minority leader, were not immediately returned on Friday evening. Democrats hold 40 of the State Senate’s 59 seats.

Illinois is Insolvent

I was certain this would happen, but the way this happened is a bit unexpected. Some of the state pension plans will run out of money in as little as 2-7 years. 

Wirepoints reports Illinois pension plans were running out of cash long before the Coronavirus hit.

Many pension funds across Illinois were running out of cash even before the Coronavirus reared its ugly head. Some funds were even on the brink of becoming pay-as-you-go plans, where pensioners are forced to rely directly on employer operating budgets, and not pension fund assets, to get their retirement checks.

The proof is in the collapsing asset-to-payout ratios of most Illinois pensions. That ratio – which is one of the statistics Moody’s Investors Service uses to measure pension health – compares a fund’s total assets to how much it pays out in benefits each year. In other words, it measures how many years a pension plan can make benefit payouts before it runs out of money, assuming no new contributions or investment income. 

Illinois’ worst-off funds only had two to five year’s worth of payouts left in 2018. They were among the most insolvent in the country. The COVID-19 market meltdown will have only shrunk their assets further.

Illinois and Chicago Pension Plan Funding

Take, for example, the Chicago firefighter fund. In 2018, its total assets were $1.1 billion and its pension payout for that year was $330 million. That means it had about 3 years’ worth of payouts on hand – an asset-to-payout ratio of 3.4. There are just a handful of funds in the nation with lower ratios than that.

By comparison, the plan’s assets amounted to nearly 10 years’ worth of payouts in 2000.  

Chicago’s firefighter plan is now dangerously close to becoming a pay-as-you-go pension plan. That would make firefighters dependent on the city – which is already junk rated and effectively bankrupt – for their retirement checks.

…

It’s not just the firefighters’ fund that’s in trouble. It’s the same thing for Chicago police. Their funds’ ratio was just 4.1 in 2018. Chicago municipal had a ratio of 4.7 years. With the markets and bond yields down significantly, Chicago’s funds are now in a precarious position.

The state’s funds are only slightly better off. Illinois’ biggest fund, the state Teachers’ Retirement Fund, had a ratio of just 8.2 in 2018. At the turn of the century, it had 17 years’ worth of payouts. 

The State Employees Retirement System had a ratio of only 7 years. 

Worst of all is the Illinois lawmakers’ fund, which had just 2.5 years worth of payouts.

There is much more bad news in the article. Including a look at various cities.

Wirepoint Concludes

If the market meltdown persists for much longer, expect the city of Chicago’s rating to fall further and for the state’s to end up in junk. The consequences of both would be huge. But so far, Gov. J.B. Pritzker and Mayor Lori Lightfoot continue to reject an amendment to Illinois’ pension protection clause.

But soon, they may be forced to choose between either chaos or reforms. Barring state bankruptcy, pension reform is the only way to cut Illinois’ strangling debts and to keep pension fund asset-to-payout ratios from plunging straight to zero.

No Bailout

Illinois does not deserve a bailout. Its pension woes are of it own making, and have nothing to do with the coronavirus.

The state and cities need serious reform starting with the state allowing cities to declare bankruptcy.

Trump could easily have passed national bankruptcy reform in his first Congressional term but he failed to do so. Now Democrats would likely block it. 

Two Things

1. Bankruptcy Reform

2. Pension Reform 

Illinois needs both, and both are up to the state, not the federal government.

Earlier this week, JPMorgan reported that its loan loss provision surged five fold to over $8.2 billion for the first quarter, the biggest quarterly increase since the financial crisis (even if its total reserve for losses is still a fraction of what it was during the 2008-2009 crash).

And while Jamie Dimon was mum on how much more losses the bank may be forced to take in coming quarters to offset the coming default surge (something we discussed in Houston: The Banks Have A Huge Problem), it hinted that things are about to get much worse when it first halted all non-Paycheck Protection Program based loan issuance for the foreseeable future (i.e., all non-government guaranteed loans) because as we said “the only reason why JPMorgan would “temporarily suspend” all non-government backstopped loans such as PPP, is if the bank expects a default tsunami to hit coupled with a full-blown depression that wipes out the value of any and all assets pledged to collateralize the loans.”

Then, just a few days later, the bank also said it would raise its mortgage standards, stating that customers applying for a new mortgage will need a credit score of at least 700, and will be required to make a down payment equal to 20% of the home’s value, a dramatic tightening since the typical minimum requirement for a conventional mortgage is a 620 FICO score and as little as 5% down. Reuters echoed our gloomy take, stating that “the change highlights how banks are quickly shifting gears to respond to the darkening U.S. economic outlook and stress in the housing market, after measures to contain the virus put 16 million people out of work and plunged the country into recession.”

In short, JPM appears to be quietly exiting the origination of all interest income generating revenue streams over fears of the coming recession, which prompted us to ask “just how bad will the US depression get over the next few months if JPMorgan has just put up a “closed indefinitely” sign on its window.”

That question was especially apt today, when JPM exited yet another loan product, when it announced that it has stopped accepting new home equity line of credit, or HELOC, applications. The bank confirmed that this change was made due to the uncertainty in the economy, and didn’t give an end date to the pause according to the Motley Fool.

Like in the other previous exits, the move doesn’t affect customers who already have HELOCs with the bank. They’ll still be able to withdraw funds on their existing HELOCs as they wish.

With HELOCs generally seen as riskier for banks than purchase or refinance mortgages as they represent a second lien on the home, it was only a matter of time before the bank – which had already exited new first-lien loan issuance would but up a “closed” sign on this particular product.

In short, JPMorgan wants no part of the shitstorm that is about to be unleashed on middle America, and especially the housing sector which is about to be hammered like never before.

While the U.S. housing market was on a steady footing earlier this year, all hell broke loose as a result of the economic paralysis and deepening depression resulting from the Coronavirus pandemic. And with would-be home buyers unable to view properties or close purchases due to social distancing measures, the health crisis now threatens to derail the sector, especially as banks are going to make it next to impossible to get a new mortgage.

To be sure, as we reported last week the residential mortgage market is already freefalling after borrower requests to delay mortgage payments exploded by 1,896% in the second half of March. And unfortunately, this is just the beginning: last week, Moody’s Analytics predicted that as much as 30% of homeowners – about 15 million households – could stop paying their mortgages if the U.S. economy remains closed through the summer or beyond. Bloomberg called this the “biggest wave of delinquencies in history.”

This would result in a housing market depression and would lead to tens of billions in losses for mortgage servicers and originators such as JPMorgan.

 

Authored by Allen Stevo via The Mises Institute,

It was autumn 1989. Momentous things were taking place in the world.

The Berlin Wall had fallen. The people of the Eastern Bloc had succeeded at getting to the West through Hungary. The firm line between east and west was wavering. The situation was moving away from the course that Warsaw Pact communist governments had charted: that their populations must remain captive within the borders of the Communist Bloc.

It was unclear whether this social contagion for freedom would spread into Czechoslovakia.

But then November 17, 1989, arrived, a day etched in history. This was Students Day, a legal holiday. Everything had to close under government fiat. People were off school and off work. But some folks were agitated about prior government actions which many saw as abuses.

When the government gave the people of Czechoslovakia that day off, it was like a match to tinder. The small flame grew into a big one.

It was a revolution noted for its bloodlessness. The Velvet Revolution, we call it today, leaning on what the Czechs called it. People, for as far as the eye could see, gathered in a giant square in Prague and called for the ouster of their government.

In the face of the idea that saying the wrong words politically could be toxic to one’s health, much like in America today, some did not resort to speaking words against their government. They merely pulled their keys out of their pockets and jingled them.

The message was clear.

Imagine tens of thousands of people jingling their keys at once.

Imagine the horror that would fill you, as a member of the communist government, looking out the window at a crowd, visible as far as the eye could see, and knowing that this delicate sound being made by each individual, growing into a horrifying sound in unison, called for your ouster.

What could a government minister, sitting at their desk, overlooking the square, even have imagined that sound to have been the first time it arose?

How ominous. How threatening. How deeply horrifying it must have been to peer out that window. The day of reckoning had finally arrived.

At that moment, a question was answered for them: what is the last thought that goes through a tyrant’s head? That is the thought that flashed through theirs as they realized what that sound was: reckoning. It had finally arrived. Were the government ministers thinking those thoughts as the keys jingled below them?

The people of Czechoslovakia remained largely peaceful.

By the end of the year, Czech dissident Vaclav Havel, who had been in prison earlier that year, would be installed in Prague Castle. The beloved Alexander Dubcek, the Slovak hero of the 1968 Prague Spring, would be his right-hand man.

The present-day American state’s response, in ways, goes beyond the communism of even the USSR. The Soviets actually wanted their economy to work. They wanted to beat the West. Churches remained open and remained an important part of society, both for political use, and because the people wouldn’t have it any other way.

But just as the communists of Eastern Europe didn’t back down until they were forced to, the lockdowns of today won’t stop unless government officials fear resistance.

There is a chance right now, with many unhappy Americans and many idle hands, much like Students Day, November 17, 1989, to tell the government “no more.”

Will they be pushed out of office? Will it be peaceful? I don’t know. Time will tell.

But it is time for this to stop. And daily, more people grow angry at being lied to as they witness the mass destruction of their country and culture in the spring of 2020.

It wasn’t the jingling of keys that escorted the evil communists from power in 1989. It was the threat of what all those people jingling keys could do if those in power did not step aside.

Retaining political influence depends dearly on timing. Some of those communists who knew when to step aside, who knew how to apologize, had prosperous careers long after the revolution, some to this very day.

In sharp contrast, the far more stubborn Nicolae Ceausescu of regional neighbor Romania was put to death by a firing squad on December 25, 1989.

We have reached a point where government officials have yet to admit that there is a real cost in terms of life and health that comes with bringing the economy to a standstill. And these same politicians and experts have yet to show that the benefits of their lockdowns are greater than the costs imposed. The models have been shown to be wrong.

Everyone is entitled to a mistake. But to continue making the same mistake repeatedly, destroying lives, amounts to malice.

In my daily life, I am increasingly seeing my country turn into a tinderbox that the disconnected leaders, elected and unelected, cannot imagine and must not toy with. To do so is dangerous for us all.

Not next month, not next week, not tomorrow. Today is the day for the government-imposed lockdowns to stop.

Late last week, we showed a chart from Credit Suisse which we described simply as “insanity” because it demonstrated that as the US careened into a depression, with GDP crashing and the unemployment rate soaring, between the latest Fed-driven surge in stocks and the collapse in earnings estimates, the PE multiple on the broader market had eclipsed the previous record of 19.0x set during the market’s February all time high, and had now hit a new all-time high of 19.4x. In other words, the market has never been more overvalued than it is right now.

The chart eventually made its way to Jeff Gundlach who yesterday tweeted that “U.S. GDP looks to be down 15%ish, unannualized, from its peak. SPX is presently down a similar amount from its peak. Ergo (and I over simplify to make a valid point) stocks now are back to the Feb 19th highs from a valuation perspective. “In Fed We Trust” is all the buyers have.”

U.S. GDP looks to be down 15%ish, unannualized, from its peak. SPX is presently down a similar amount from its peak. Ergo (and I over simplify to make a valid point) stocks now are back to the Feb 19th highs from a valuation perspective. “In Fed We Trust” is all the buyers have.

— Jeffrey Gundlach (@TruthGundlach) April 17, 2020

Gundlach’s math is not quite correct because as JPMorgan showed last week, the beta of corporate profits to moves in GDP is about 7x during financial crises. As a result, according to the bank’s chief economist Joseph Lipton, in the current recession in which JPM expects global GDP growth to collapse by the same 9.8%-points in Q2,  the bank is applying the same profit drop beta of seven—on par with the global financial crisis– which implies a plunge in corporate profits of roughly 70% in the year through 2Q20.

Meanwhile, with every passing day the fundamental disconnect is getting worse, because as stock prices soar (mostly due to momentum-chasing machine buying while humans sell) earnings estimates are cashing…

… with Goldman calculating that its latest bear case PE multiple (on 2021 earnings no less as nobody is looking at 2020 anymore) is now a dot com bubble-eseque 24x.

Meanwhile, crashing the bulls’ party, or rather their expectations for a V-shaped recovery, JPMorgan also cautioned that corporate profits won’t recover their pre-pandemic baseline until some time in 2022 if not 2023, which is terrible news for Wall Street strategists as it means they will now have to apply even more ridiculous forward multiples from 2023 for their optimistic recos to make any sense.

And so as Credit Suisse, JPMorgan and Goldman all point out the schizophrenia in being bullish in a time when corporate profits are set for the biggest – and longest – drop since the Great Depression, late last week two more banks joined the bandwagon with Citi warning that “equities fall the same as EPS in a recession… and reflect that equity markets are currently not reflecting the expected decline of 50% in global EPS in 2020.” Make that 70% according to JPMorgan.

Finally, exactly two weeks after our post on the “shocking” topic of how expensive the market is right now, Bank of America’s Savita Subramanian has also done the math and concludes that as “stocks have rallied, bottom-up consensus estimates for 2020 have fallen”, which in turn has pushed the S&P 500’s forward P/E ratio from March’s low of 13.0x to 19.5x, higher than mid-Feb’s peak P/E of 18.9x.

In other words, using the bank’s reference table of 20 different valuation metrics, “we’re back to elevated multiples on most of the 20 metrics we track” with just three exceptions: lower than average Price to Free Cash Flow, cheaper relative to bonds (equity risk premia frameworks) and – drumroll – relative to gold.

The last one is especially amusing because it means that slowly but surely investors are finally realizing that the biggest winner after the current reflationary surge will not be equities but what the WSJ once dubbed “a pet rock.”

Of course, even in this unprecedented dislocation of a “market”, equity investors still have hope, which is literally is all they have: or as Gundlach puts it, “In Fed We Trust” is all the buyers have” and Citi agrees: “Central bank intervention could cap the downside.”

Better pray to those central banking gods, bulls.

Authored by Bruce Wilds via Advancing Time blog,

The Paycheck Protection Program or PPP was funded with $350 billion in the last stimulus bill, this money is now gone. Of the thirty million small businesses in America, only 1.7 million received money from the 2.3 trillion dollar aid package passed to help sustain America during this difficult time. If the government blew through this money and was only was able to help only around 5% of small businesses it is difficult to think another 250 billion dollars will set things straight. 

Clearly, because the government made promises it delayed the wave of firing while companies waited for help.

The government has failed to keep its promise so now we should expect unemployment to soar as reality sets in. One of the largest problems facing small companies is they are often underfunded and have difficulty getting financing at reasonable rates. Banks find larger companies much more profitable. The sector of the economy most damaged by the covid-19 shutdown is small business. When this is over America will find many small businesses have been decimated and are not able to reopen. Others will never recover and be forced to close within months. Since small businesses employ over 54 million people in America and their importance in the economy should not be underestimated.

• Small businesses contribute 44 percent of all sales in the country.

• Small businesses employ 54.4 million people, about 57.3percent of the private workforce.

Rest assured government employees and bureaucrats will still continue to get paid but small business, the most productive part of the economy has a knife to its throat. As a landlord and small business owner, I can tell you the program was structured in a way that will be of little help to most small businesses. The government slammed expensive legislation through with no idea of the damage they were doing and how it will cause hundreds of thousands of businesses to close their doors forever. Washington has become so attuned to dealing with lobbyist from mega-companies it has lost sight of the fact small is small, and when this comes to business, this means usually under twenty employees, not hundreds.

90% Of Businesses Are Small (click to enlarge)

The government’s answer to keeping people employed was to promise small businesses an easy to get, rapid maximum loan amount of two and a half times a company’s average monthly payroll expense over the past 12 months. This loan would turn into a grant and be forgiven if a company did not fire its employees. Sadly, legislators failed to take into consideration that not all small businesses are labor or payroll intense. Some businesses with large or expensive showrooms are getting hammered by rent, others by inventory, or things like taxes, utilities, or even by having to toss products due to spoilage.

The PPP also failed to address the issue of what these employees are going to do while the company has no customers and business barely trickling. In the past, these employees were expected to pursue activities that earned revenue and garnered profits for the business but with no costumers, this is difficult to do. The PPP also ignored the fact that by keeping these employees on the payroll a generous employer is left open to the harsh mandates laid out in the government’s previous bill. The hastily drawn up 110-page federal covid-19 economic rescue package, which Trump fully supported dealt a hard blow to small business. For a small business this is a disaster, the bill requires; 

• Employers with fewer than 500 employees and government employers offer two weeks of paid sick leave through 2020.

• Those same employers must now provide up to 3 months of paid family and medical leave for people forced to quarantine due to the virus or care for family because of the outbreak

As expected, this measure,  named “Families First Coronavirus Response Act.” resulted in millions of workers to suddenly lose their jobs. Ironically, it was held before the voters as proof lawmakers could work together during a crisis.  By framing the poorly crafted pork-packed bill this way promoters positioned themselves to demonize those unwilling to support it. Remember, this bill is was in addition to the $8.3 billion emergency spending bill first approved to curb the spread of covid-19.

The Private Sector Is Shrinking (click to enlarge)

As government has grown larger it seems to have become totally oblivious to the fragility of many small businesses and how much it can cost a community when they close. By framing these pork-packed bills as bipartisan their promoters imply they are fair and balanced. This is not true, small business is the big loser and hundreds of thousands will soon have to close.  With so many tenants looking at foregoing rent small landlords that don’t have deep pockets also face huge problems. We have our heads in the sand if we think companies that exist on events where people gather will overnight regain their luster. It is not like someone can simply flick a switch and things will return to normal.

Reality undercuts the idea of the “V-shaped recovery” theory and the idea after the economy has come to a dead stop it can quickly reboot and be back at full speed in a few months. The government has presented us with an extension of crony capitalism structured to throw just enough to the masses to silence their outrage but in the coming weeks, we will see it failed. Large businesses with access to cheap capital are the winners and the big losers are the middle-class, small businesses, and social mobility. All those people that want a higher minimum wage can forget that ever happening if we don’t have jobs.

As for just how much small business owners make, according to figures from 2015 from the Small Business Administration the median income for self-employed individuals at an incorporated business was $49,804 and $22,424 for unincorporated firms. According to PayScale’s 2017 data, the average small business owner’s income is $73,000 per year. But, total earnings can range from $30,000 – $182,000 per year. This means it varies greatly depending on where and just how big the business is, however, it is important to remember these people have “skin in the game” and most risk losing everything if their business fails.

It is important to recognize that starting your own business has always been about the opportunity to design and build your own future. It is a symbol of freedom not a guarantee of wealth. Many people choose this path proudly, not to make more money but as a way to express their individuality. For these competent and talented people, a job in government or at a large company often offers more security and benefits but far less freedom. Do not underestimate the value of small business and what it contributes to our society. Companies such as Amazon are the anti-thesis of small business making their workers a cog in a machine and stealing their soul.

Based on the government’s promise to small businesses a great many held off on letting employees go but with each passing day in order to survive they are now in the process of letting hundreds of thousands of employees go. This is a ticking time-bomb. By telling these businesses to close and then through its failure to carry out its promise of helping them the government has created a situation with massive negative economic ramifications. To make matters worse, people going on unemployment look to get almost as much as those that do work. Why will anyone want to work, especially government workers when they can get paid to stay home? This is not about wanting more money for small business, it is about the reality that the firings are just beginning.

The wealth inequality story is not a complicated one to figure out. In essence, tens of millions of Americans were already suffering from insurmountable debts, no savings, and low wage jobs, even before the pandemic unfolded and crashed the economy.

Now the working-class poor are starting to get angry, sitting on their couches in quarantine, as they have recently been laid off, only to watch President Trump at afternoon press briefings tout about his epic bailouts of corporate America and Wall Street, while everyone else gets a lousy $1,200 check.

A “social bomb” is brewing in America – we’ve been documenting how the next crisis could be a social one. The bottom 90% of Americans are getting smarter by the day as they sit in lockdown, now organizing on the internet, and are plotting their very next big move that could be severely disruptive: rent strikes. 

New York City housing activists are preparing to unleash a “massive wave” of rent strikes in the next two weeks, reported Bloomberg. 

Housing Justice For All hopes to have as many as one million New Yorkers on May 1 participate in a rent strike to pressure Gov. Andrew Cuomo to cancel rent for the duration of the lockdown. 

“With so many New Yorkers unable to pay rent for the foreseeable future, the current crisis is unsustainable and demands action,” Housing Justice for All and New York Communities for Change said in a statement Thursday. “Many tenants have no ability to pay rent, and landlords can’t collect rent from tenants who are broke.”

Lena Melendez, an activist who spoke with Bloomberg, said people in her building have organized and will not pay rent on May 1. 

Melendez said landlords “have gotten taken care of” by the government, making the case that working-class poor do not need to pay rent. 

“They have gotten tax abatements and deferments on their mortgages. And tenants have just gotten a temporary freeze, a pause, on evictions,” she said.

New York City’s Independent Budget Office projects about half a million people will lose their jobs in 2020. The city has been thrown into a recession, if not depression for the 1H20, as a social crisis is brewing…

How long until rent strikes start developing in other large major metros?

 

Authored by Robert Wright via The American Institute for Economic Research,

The title comes from the two movies reviewed below, Idiocracy (2006) and Experimenter: The Stanley Milgram Story (2015). In normal times, neither would merit mention, much less review, at such a late date. But unless you are just coming off six months on a trapline in Alaska, you know that these are abnormal times.

I couldn’t decide which movie better fits our current situation but then it dawned on me that they are mutually reinforcing, not exclusive.

Idiocracy stars Luke Wilson, Maya Rudolph, and Terry Crews. In 2005, soldier Wilson and prostitute Rudolph agree to be cryogenically frozen for a year but through a series of mishaps end up sleeping for 500 years. They awaken to a dystopia where selective pressures have rendered humans dumb and dumber. Americans live surrounded by mountains of trash, watching trash on television, including shows like “Oww My Balls” that make Johnny Knoxville’s Jackass franchise look like high culture. 

POTUS Crews and his fellow Americans speak in a pidgin of grunts and rural, urban, and Valley Girl slang that sounds eerily familiar. Unlike our presidents to date, though, he fires a machine gun, Al Pacino-style, for rhetorical emphasis.

I don’t want to ruin the ending, unsurprising as it is, with spoilers but would like to draw attention to a scene where Wilson tries to explain to Crews’ cabinet that the reason that crops stopped growing was because they were irrigating with Brawndo, a ubiquitous sports drink tagged “The Thirst Mutilator,” instead of water. Everyone was sure that Wilson, though clearly the most intelligent man on earth, was wrong because everyone knows that water is only used in toilets. Moreover, Brawndo is superior to water for irrigation because “plants crave it” because it has “electrolytes.” Nobody knows what electrolytes are but they all know Brawndo has them and that plants crave it.

Somebody with some technical skills ought to dub coronavirus-speak over that scene as it would surely go “viral.” Why do we have to stay inside, even though it is safer outside, and shutter businesses? “To flatten the curve and raise the line.” What does that mean? “Coronavirus craves isolation and economic desolation!” How do you know that? “Flatten the curve, raise the line!” At any cost? Wouldn’t less extreme measures work at least as well at lower cost? “Coronavirus craves isolation and economic desolation!” You get the idea.

Interestingly, after Wilson orders the switch to water, half of Americans lose their jobs because they worked for Brawndo, the stock price of which immediately dropped to “zero” after Wilson’s water-only irrigation pronouncement. That was “good” unemployment, though, because it ended “bad” employment, the creation of an effective herbicide containing “electrolytes.” The unemployment governments are causing today is bad unemployment because it ended good employment for no good reason. There, I said it in terms even a denizen of Idiocracy America could understand.

Where Idiocracy is a semi-funny futuristic dystopian fiction, The Experimenter is a super quirky historical docudrama focusing on the actual experiments conducted by Stanley Milgram in the early 1960s.

Milgram sought to understand why people followed orders during the Holocaust. So he had an actor in a lab coat direct a test subject to administer electrical shocks of increasing voltage to another actor in an adjacent room. The shocks were fake but the screams were real. To everyone’s horror, Milgram discovered that 65 percent of test subjects were willing to administer lethal voltages to another human being, only because an authority figure, in this case a “scientist,” claimed it was necessary.

Test subjects were paid in advance and told during pre-experiment briefings that they could leave at any time, for any reason, with no penalty. In debriefings, some said they were shaken by the experience, which would never pass an IRB today, but none felt coerced in continuing by anything other than the “scientist.”

Milgram played around with variables but time and again about two-thirds of his test subjects, white or black, man or woman, gentile or Jew obeyed the authority figure. He believed that people with an “agentic personality” were susceptible to manipulation because they saw themselves as simply “doing their job” or “playing a role” and hence not morally responsible for their actions.

Again, somebody with some video editing skills could have a field day with that scene by dubbing over something like:

Subject: Why must I press the shock button?

“Scientist”: We must flatten the curve and raise the line.

Zap followed by whimpers.

Subject: The patient sounds like this is hurting him.

“Scientist”: Some must suffer today so that some old people can die of the flu, next year.

Next higher voltage switch, zap, followed by a scream for mercy.

Subject: I don’t know how much more the patient can take.

“Scientist”: What part of flatten the curve and raise the line don’t you understand?

Subject: I don’t understand how torturing this person helps anything.

“Scientist”: How dare you! I am Doctor Fow Chi, M.D., D.O., S.T.A.T.I.S.T., Ph.D. I, and I alone know what is best.

Voltage up, zap, blood curdling scream.

Subject: I still don’t understand.

“Scientist”: And oh by the way you are not zapping just one guy but almost every business owner in America.

Subject: I won’t!

“Scientist”: You will, because I am wearing a white lab coat!

Subject: Do you have a degree in economics? Economic policy? Economic history even?

“Scientist”: Of course not! All irrelevant to flattening the curve and raising the line.

Subject: I don’t know …

“Scientist”: Here is a bunch of money and laws that say you do not have to pay your bills.

Voltage up. Zap. A low moan, then silence.

“Scientist”: Excellent job. You have flattened the economy. The money I just gave you is now worthless and the companies you owed money to are bankrupt anyway. Have a nice life, what is left of it anyway. Now go on social media and brag about what you have done!

Another famous experiment discussed in the movie, conducted by Solomon Asch, showed that one third of his test subjects knowingly chose the wrong answer to a simple question about line lengths when previous respondents, actors instructed to choose the wrong answer, erred. Those test subjects valued conformity over obvious truth. The good news is that when only one other person in the respondent group picked the correct answer, conformists dropped to a mere five percent. 

The correct policy response to COVID-19 is more difficult to discern than judging the length of lines and a lot more is at stake, but there are people, more and more each day, who are no longer blindly conforming to the “shift the curve and raise the line” mantra. They are asking questions, tough ones, and thinking for themselves, which is still technically legal in most states.

While a few courageous governors have refused to order lockdowns or massive business closures, most Americans remain locked in what appears to be a giant Milgram experiment testing how far they are willing to go down an increasingly irrational path, egged on by authority figures whose unconstitutional dictates need not be followed. We will not have to wait half a millennium for an America like that depicted in Idiocracy unless we have the courage to say, “enough!”