California braces for economic fallout as coronavirus spreads

Grand Princess cruise ship off the coast of California | California National Guard via AP

OAKLAND — Quarantines. Cruise ships idling offshore. Silicon Valley workers holed up at home. Dwindling international trade, and the possibility of sustained damage to the fifth largest economy in the world.

California is at the heart of the unfolding coronavirus crisis in the United States, forcing Gov. Gavin Newsom, big-city mayors and business leaders to brace for wide-ranging economic impacts in a state deeply dependent on global trade, technology and tourism.

The situation even has Newsom and President Donald Trump, usually eager antagonists, preaching cooperation as all levels of government work to contain the threat.

Multiplying cases and California’s first death have elected officials here focused on responding swiftly and decisively. Newsom declared a statewide emergency, halted a cruise ship in the Pacific Ocean that was confirmed Friday to have at least 21 infected people and ordered insurers to drop out-of-pocket costs for testing.

Even as political leaders advance similar efforts to blunt the impact, they acknowledged the possibility of sustained damage to the world’s fifth largest economy as potential quarantines loom, international trade dwindles and visitors stay away.

San Francisco Mayor London Breed, who has already declared a local emergency, said Friday that the city is “in crisis mode” and is bracing for a wide range of economic impacts as the extent of the virus becomes known.

“The fact is we need equipment, we need protective gear, we need to set up stations for people to be quarantined,’’ Breed told MSNBC’s Stephanie Ruhle, adding that the fallout “is going to have an impact on our economy, and we are going to have to make a lot of adjustments to deal with that.”

Similarly, San Jose Mayor Sam Liccardo said during a press conference that it could take a year for the fiscal and economic impacts to fully materialize, which could mean “significant dislocation.” Liccardo said that his city must set aside more funding to provide services related to alleviate a crisis that is preoccupying city officials at all levels and “consuming easily 70-80 percent of my time right now.”

Elected officials have lofted proposals to ease the burden on Californians: Liccardo proposed a moratorium on evicting residents struggling to meet rent because of lost wages; a state legislator has proposed a bill to shield quarantined or isolated workers from workplace retaliation; and California’s labor commissioner encouraged disrupted workers to apply for unemployment insurance or paid family leave benefits.

Authorities at the highest level of state government have been planning for such a pandemic for years, according to Sean Walsh, who served as deputy chief of staff to Gov. Pete Wilson and directed the Office of Planning and Research for Gov. Arnold Schwarzenegger. He said officials gamed out responses “for just the scenario we’re facing right now,“ how such a pandemic might roll out and how the federal government might respond, he said.

“So the governor’s office has been looking for a long time at preparing. And I’m really surprised at how much this has played out like” those exercises, Walsh said, praising Newsom’s handling of the crisis so far and pointing to the backstop of “a pretty solid group of career public servants that at these agencies’’ whose work transcends politics.

But the stakes are especially high, Walsh said, “when you have pillars of San Francisco tech world, like Facebook and Twitter, telling people not to come into work, and to work from home … that sends a signal across the world.“

While some tech companies are reassessing supply chains or telling employees to stay home, the most immediate impacts in the Bay Area are likely to reverberate through the leisure and hospitality industry, said Bay Area Council Economic Institute Executive Director Jeff Bellisario. He estimated that some 150,000 people work in jobs servicing travelers and pointed to a series of companies canceling conferences and limiting employee travel.

“We’ll be looking pretty closely at numbers at airports, what we’re seeing in terms of employment at restaurants and hotels,” Bellisario said.

Global trade is also under threat, with officials at California’s ports — critical gateways to Asian markets and sources of jobs — warning of sharply curtailed activity. Reductions in international trade could be acutely felt in California’s agricultural industry, a pillar of the state’s economy that’s dependent on access to foreign markets.

The Pacific Maritime Association said workers’ shifts in Long Beach and Los Angeles had plummeted by 21 percent compared to last year. The executive director of the Port of Los Angeles said dozens of ships have turned away, amounting to a sharp reduction in port calls.

“We’re concerned about it getting actually worse,” said Long Beach Mayor Robert Garcia, pointing to idled dock workers and shipping hubs that are “sitting pretty empty.”

Garcia said that officials will have to look long-term at offsetting the economic pain with measures like incentive packages to lure back shipping companies. But in the meantime, he said, cities have already seen a reduction in tourism and conventions like a planned economic summit that was abruptly canceled.

“Last weekend we had every hotel booked, we had restaurants also throwing parties,” Garcia said. “People lost a lot of money.”

Similarly, Bellisario said policymakers must be prepared “to put everything on the table and say if this does get bigger, how do we respond.”

California had 69 confirmed coronavirus cases as of Friday afternoon, and that number climbs each day. Of particular concern: a boatload of some 2,500 passengers disembarked Feb. 21 in San Francisco from the Grand Princess, and eight of those passengers have now tested positive for coronavirus, including one Northern California man who died this week. Local officials believe passengers likely have passed on the virus within their communities — and not just in California.

Newsom has repeatedly said the federal government has met California’s requests for tests since late last week, and Trump took to Twitter on Friday morning not to bury Newsom but to relay that the two spoke about treating passengers anchored in the waters off the San Francisco Bay.

Vice President Mike Pence praised Newsom on Friday for cooperating with the federal government as Pence revealed that 19 crew members and two passengers tested positive for coronavirus. The two governments will have to work together for days to come as they figure out where to land the ship and where to locate the 2,422 passengers and 1,111 crew members on board.

Despite that comity, some elected officials have expressed frustration with a muddled federal message. Garcia, whose city is staring down a steep drop-off in economic activity, lamented that “some of the national dysfunction around trade and tariffs and quite frankly a complete mess of a communications strategy from the federal government in this case is not helping.”

Democratic Rep. Ro Khanna, whose Silicon Valley House district is home to giants like Google, Facebook and Tesla, says that the Trump administration still has done too little to provide tests and to lay out “a plan of action” to shield California. Rep. Ted Lieu tweeted that a lack of federally provided kits constituted a „A DERELICTION OF DUTY“ and called it „shameful“ that Trump had downplayed the risk.

“The most effective way to limit this disease’s impact on our economy and protect people is to dramatically increase the amount of tests available,’’ Khanna told POLITICO. “It is disappointing that the administration, months after the first cases were reported abroad and now weeks after they’ve spread across the U.S., still doesn’t have a credible plan of action in place Silicon Valley is fueled by face-to-face interaction and collaborative creativity.”

Pence said Friday that he expects wider availability of coronavirus tests within weeks as private manufacturers ramp up production of the kits.

In California, coronavirus has for the moment overshadowed homelessness, which had dominated the political agenda for the first several weeks of the year. The two issues are now intertwined as coronavirus adds a volatile new source of risk for those living on the streets.

Berkeley Mayor Jesse Arreguín said his city was installing hand-washing stations and portable restrooms near encampments, an acknowledgment of the fact that “the people that would be most impacted by the widespread nature of the coronavirus are people that don’t have access to shelter, don’t have access to running water.”

The possibility of a major fiscal hit also imperils the state’s plans to deal with homelessness and a range of other pressing issues. Lawmakers are pushing Newsom to commit $2 billion to allaying the state’s worsening housing crisis, but the threat of a pandemic complicates those plans.

“We don’t know what the future holds but there’s a lot of different possibilities including more ongoing economic impact to the state,” said Assemblyman Rob Bonta (D-Oakland), “which could hurt our ability to spend on the priorities that we have … chief among them, addressing our homelessness crisis.”

As businesses adapt to a precarious situation, Bellisario pointed to the possibility of an enduring shift in economic habits — from more employees working from home to more consumers using delivery services — that could outlast the current crisis.

“This is the type of event where peoples’ lives and businesses could be upended and then they try something new,” Bellisario said.