Were the Airline Bailouts Really Needed? (nytimes.com) 160
Andrew Ross Sorkin, writing at The New York Times: A year ago this week, Doug Parker, the chief executive of American Airlines, flew to Washington to begin what became a yearlong lobbying campaign for a series of taxpayer-funded bailouts during the pandemic. He wasn't alone. The campaign also included leaders from Alaska Airlines, Allegiant Air, Delta Air Lines, Frontier Airlines, Hawaiian Airlines, JetBlue Airways, United Airlines, SkyWest Airlines and Southwest Airlines -- all with their hands extended. The flight attendant and pilot unions were also part of the lobbying. A year later, as the stock market cruises to new heights, questions should be asked about the $50 billion in grants that were used to prop up the airline industry. Was it worth it? And was it necessary?
The good news is that the rescue money likely saved as many as 75,000 jobs, most remaining at full pay. And that money also kept the airlines from filing for bankruptcy, and in a position to ferry passengers all over the country to jump start economic growth as the health crisis subsides. The bad news is that it is also likely that taxpayers massively overpaid: The original grant of $25 billion in April meant that each of the 75,000 jobs saved cost the equivalent of more than $300,000. And with each additional round of bailout money, that price has grown.
The truth is that shareholders of the airlines have been the biggest beneficiaries. That includes airline executives, many of whom have been paid in stock for years and stood to lose millions of dollars if their holdings were wiped out. Airline chiefs collected tens of millions per year in compensation before the pandemic, in part by boosting their companies' share prices by regularly buying back tens of billions in shares. That meant setting aside less money for a rainy day -- or, in this case, a pandemic. But here we are: Shares of United traded below $20 in May; today they are above $60. The patterns are similar for the other major carriers. Airline stocks -- lifted by taxpayers -- are up nearly 200 percent from their pandemic trough and have almost recovered their losses. It is fair to say that we socialized the airline industry's losses and largely privatized the gains.
The good news is that the rescue money likely saved as many as 75,000 jobs, most remaining at full pay. And that money also kept the airlines from filing for bankruptcy, and in a position to ferry passengers all over the country to jump start economic growth as the health crisis subsides. The bad news is that it is also likely that taxpayers massively overpaid: The original grant of $25 billion in April meant that each of the 75,000 jobs saved cost the equivalent of more than $300,000. And with each additional round of bailout money, that price has grown.
The truth is that shareholders of the airlines have been the biggest beneficiaries. That includes airline executives, many of whom have been paid in stock for years and stood to lose millions of dollars if their holdings were wiped out. Airline chiefs collected tens of millions per year in compensation before the pandemic, in part by boosting their companies' share prices by regularly buying back tens of billions in shares. That meant setting aside less money for a rainy day -- or, in this case, a pandemic. But here we are: Shares of United traded below $20 in May; today they are above $60. The patterns are similar for the other major carriers. Airline stocks -- lifted by taxpayers -- are up nearly 200 percent from their pandemic trough and have almost recovered their losses. It is fair to say that we socialized the airline industry's losses and largely privatized the gains.
Plutocracy 101 (Score:5, Informative)
The 1% have to the most power and thus the 1% get bailouts first.
Re: (Score:2)
The 1% have to the most power and thus the 1% get bailouts first.
What bout the 1.2 trillion in "bailout" checks to everyone else, with no requirements other than prior year income amount? 50 billion is less than the estimated annual Medicare fraud.
Re: (Score:3, Informative)
The top 1% pay more in taxes than the bottom 90% combined
It's about paying your fair share. The top 1% certainly do not do that.
Re: (Score:2)
Define "fair share"?
Re: (Score:2)
Re: (Score:3)
Near 0% when your income is at subsistence levels, and ramping up from there, closing in on 100% as income approaches that of a small nation. Because at the point you essentially become a nation, you owe more to your people than to yourself.
Re: (Score:3)
It really isn't though, or everyone would pay X% in a flat tax
Don't be stupid; there are people watching.
Re: Pay To Play (Score:2)
Re: (Score:2)
That's pretty much the definition of "plutocracy", and not "democracy". Note that the Network Effect often allows the rich to get richer, also known as winner-take-all syndrome. Does anyone want to claim Microsoft is full of merit?
That's just math (Score:5, Insightful)
Someone makes literally 1000x more than I do, not even an exaggeration. Even if they pay much more taxes than I do, they certainly don't pay 1000x the taxes I do.
if the 1% paid more tax than the bottom 99% then we'd be on to something. That the break even point is around top 1% versus bottom 90% should be a big red flag.
Re: (Score:3)
Funny you point out the bottom half 'only' pays 3% of tax in the US, while the top half pays 97%. If by 'fair share' you imply that a population's tax should be proportional to their relative wealth, then when you consider the bottom half only owns 2% of the wealth in the US, they are overpaying their fair share by at least 1%.
Re: (Score:2)
Sure, but they already *do* get more out the government. The government's never gone to war to protect the income of people like *us*. When they negotiate a trade deal, you or I don't get to have special goodies put into that for *us*, nor do they craft loopholes to laws to meet *our* special needs.
Re: (Score:2)
Perhaps in terms of dollars, but not in terms of percentages. Between Federal and State and Local Taxes about 1/3 of every dollar I ear goes to taxes. The wealthy don't need actual cash as much as I do.
While I have to go to the grocery store and buy food, a wealthy CEO can expense restaurants as a normal business expense. You don't need to buy a car, you can be supplied a company car, or private jet, or your home you could take a portion of that and classify it as your office. So with your business pay
Re: (Score:2)
While I have to go to the grocery store and buy food, a wealthy CEO can expense restaurants as a normal business expense. You don't need to buy a car, you can be supplied a company car, or private jet, or your home you could take a portion of that and classify it as your office.
Deductions like that are pretty irrelevant at the CxO level or even the VP level. When you make that much, those kinds of expenses are in the roundoff error of the daily fluctuation of your net worth, and eventually of your monthly salary.
I suspect their concerns are more at the level of long-term financial and corporate planning, rather than that of month-to-month subsistence expenses.
Re: (Score:3)
Re: (Score:2)
Re: (Score:2)
Probably true. However, it's irrelevant, since Federal taxes are based not on wealth, but on income. You could own the entire State of Alaska and have no income to speak of (hypothetically. most likely if you owned Alaska you'd have oil revenues coming out your ears).
Own a mansion? Way cool, but that's not income. Have a HUUUUGE bank balance? Still not income.
Mind you, individual States have other ways of getting taxes out of you t
Re: (Score:2)
They do get more... way more.
The 1% have a largest most expensive national defense system in the world to protect their assets from foreign invasion and plundering - a guy with hotels, golf courses, mansions, high-rises, yachts, etc. require significantly more protection then 6-pack joe and his trailer and 4 wheel pickup truck.
The 1% have a variety of various forms of national and local law enforcement, tiered legal system again to protect their assets and property.
The 1% use significantly more of the nati
Re:Pay To Play (Score:5, Interesting)
Go get the actual numbers before pulling things out of your imagination.
Also, in 2019 the top 10% held SEVENTY PERCENT of the wealth in this country, with of course the top 1% being the majority of that top 10% category.
But those numbers are old, and it's only gotten worse by trillions of dollars. (Yes, all this is well documented, go look it up for yourself)
Also, the health and activity of the economy rests on the lowest rungs, while the wealthiest have little effect on the economy at all. (Again, well documented, in this case by economists who know more about economies than anyone here that isn't an economist.)
Of course there is a limited amount of money in the world and this country, so the more wealth that any one person or group has, the less there is for everyone else.
Now of course there are people that are going to scream that I'm wrong.
I'll head this off here (except for the really delusional or stupid ones) all these facts are well documented, and the data is publicly available.
Of course these aren't my conclusions, I tend not argue with experts in a field I'm not an expert in myself, I'm not that stupid.
If someone wants to argue, go scream pointlessly at the IRS, the various economists out there, including nobel prize winners for economics, etc, not me.
As to taxes, the only intelligent thing to do is tax the rich, not only do they have an outsized ability to redirect further wealth to themselves, and get a greater benefit from the society and industries we create, but they also have most of the money. It doesn't hurt them, other than their greed. After all, they did great when the tax for the top bracket was 90%.
Re: (Score:3)
Number one, do you have a source for that?
Second, why do people with ludicrously larger amounts of money pay much less of a tax rate than us plebs?
Warren Buffet found that while he paid a total tax rate of 17.7%, the average tax rate for people in his office was 32.9%. - https://www.fool.com/taxes/202... [fool.com]
Folks that make hundreds, thousands, millions times more than the majority of people need to be held account with a progressive, incremental tax system. That is, they should generally pay x1 percent for the first y1 dollars, x1 + x2 percent for the next y2 dollars and so on, just like the majority of people but with increasing incremental tax rates.
Re: (Score:2)
The top 1% pay more in taxes than the bottom 90% combined. If you pay more you should get more, right?
Should the oldest eat the most? If you have four people eating, one 75 years old and the other three are each 25 years old, should the 75 year old get half the food and the other three split half the food among themselves? No, of course not, they need equal portions. If anything the more active 25 year olds may need more. Same true here. A billionaire can lose 900 million and still live comfortably, but if you’re making $10 a hour and lost 90% of your income how can anyone live on $1 a hour?
Re: (Score:2)
Comment removed (Score:4, Funny)
Re: (Score:2)
Asset inflation (Score:5, Informative)
Re: (Score:2)
Their purchasing of a houses will essentially pay for my entire generations early retirement.
They'll probably be forced to rent in most cases. But I suspect they'll be forced to rent a lot more everyday things anyway.
Re:Asset inflation (Score:4, Interesting)
Their purchasing of a houses will essentially pay for my entire generations early retirement.
Yup, basically this. The great tragedy though is that at some point this will end because the new workers entering at the bottom will refuse to support it. The boomers will probably get away with it because of the entrenchment of neo-liberal ideology, but there is already a shift happening.
So once the young person has spent the next 20 years piling 70% of their income into their mortgage (which goes to someone living it up ultimately), they will then find that the generation behind them are not so keen on the deal and vote it remove the rentier framework that allowed that income extraction. The home owner will find their equity slashed, and they will have no savings for retirement - their whole working life was basically spent supporting a retirement system that they will not benefit from.
What frustrates me most is that this has been obvious since ~2016 when the govt of the world re-inflated assets markets to continue the pre-GFC trend and then waved their hands around pretending they didn't know what was going on. If the younger generation had been a bit more world wise, occupy wall street could have developed into a proper movement to have a fundamental discussion about how we are going to support an ageing population (hint: young people paying more tax, old people accepting less cosy retirements in exchange for more security), but back then most people had no idea (or interest) in how the plumbing of the financial system worked so it denigrated into a 'bankers people bad' protest. While that certainly had some merit, the reality is the bankers were just doing the dirty work for a society that did not want to confront a fundamental demographics and equality problem.
Re: Asset inflation (Score:2)
That's like a $2M house on median family income. You should choose realistic numbers if you want someone to pay attention to your argument. Currently, median US family income can pay off the median US existing home value in 20 years, including taxes and insurance, for approximately 35% of income.
Re: (Score:2)
$2M is a fixer upper here, with prices going up 9% a month, mostly driven by the K shaped recovery. There are a lot of people who have a lot of spare money during this pandemic, and they want a nicer home to work out of and haven't had the usual things to blow money on.
Re: Asset inflation (Score:2)
Re: (Score:2)
Well, it is in Canadian funds but from https://dailyhive.com/vancouve... [dailyhive.com]
This is a couple of months out of date and it looks like I may have slightly exaggerated but I do see articles about boarded up h
Re: (Score:2)
Yeah, I cannot believe I didn't buy real estate 7-8 years ago. But the loose money inflating asset prices has been happening since 2008. I kept expecting the spigot to go off and the crash to happen.
I kind of still do - but I should have just gotten in and rode it up. Even now, a crash is just going to reset it to 2015 levels.
Re: Asset inflation (Score:2)
They're eventually going to eat the rich.
You know that old airline exec sayin' ... (Score:3)
The truth is that shareholders of the airlines have been the biggest beneficiaries. That includes airline executives, many of whom have been paid in stock for years and stood to lose millions of dollars if their holdings were wiped out. Airline chiefs collected tens of millions per year in compensation before the pandemic, in part by boosting their companies' share prices by regularly buying back tens of billions in shares.
[Voice of Morgan Freeman]: Get busy living or get busy flying.
Yes. Yes they were needed. (Score:2)
Without the bailouts there would have been a complete collapse of the airline industry that is constantly on the edge even in good years. The capital expenses of the airline industry -from top to bottom- is really extraordinary. The only way it exists at all is by being heavily subsidized by governments around the world, including in the US.
If we just stepped back and watch the airlines fail it would take a good chunk of the global economy with it.
Re: (Score:2)
As the summary points out, the bailouts also mean that the airlines are here NOW as we're getting rid to start everything back up. Imagine if they weren't and you pretty much couldn't go from eg. America to Europe and back anymore.
Re: (Score:2)
Its not hard to imagine at all - we basically have not been able to travel between Europe and America due to lock downs and various travel restrictions for most of the past year.
It would delay the recover of the tourism industry a bit longer, but every other business has adapted already. Basically nothing of *real* value would be lost.
Re: (Score:2)
Not just tourism. Business travel, parcel travel, etc.
Businesses do Zoom right now because they have to. It's not preferred by any means.
Re: (Score:2)
Business travel - Tele-meetings have pretty much proven to be a suitable for 95% of cases. As long as handful of high cost or even just charters kept operating everything would be fine.
parcel travel - shipping packages would probably see some price increased because the airlines do use their left over capacity for parcels but other air freight was not going to be servery impacted. Fedex and pals were doing just fine.
Businesses do Zoom right now because they have to. It's not preferred by any means
By whom middle management who misses watching movies and drinking free beers for half a day
Re: (Score:2)
From your comment it is clear you don't value face to face interaction or the social dance that is networking,
Your betters in both status (C-suite) and pay (sales) see it differently.
Re: (Score:3)
Air freight for parcels never needed a bailout. That portion of the business has been booming as everyone started buying everything online.
Re: (Score:2)
Air freight is still very heavily subsidized with public infrastructure.
Re: (Score:2)
Sure, but it didn't need an additional pandemic stimulus, it was doing just fine with the handouts it already had.
Re: (Score:2)
I am completely sure the companies that qualified took their PPP loans too.
Re: (Score:2)
Air freight for parcels never needed a bailout. That portion of the business has been booming as everyone started buying everything online.
A lot of Air freight is delivered via dedicated cargo planes. However, packages also get shipped on commercial passenger flights. According to this article [howstuffworks.com], "Just about every passenger flight is carrying some freight along with the passengers and their baggage. The U.S. Postal Service alone leases space on 15,000 of the approximately 25,000 scheduled passenger flights each day. Commercial airlines make about 5 to 10 percent of their revenue from hauling freight." That portion of air freight was impacted
Re: (Score:2)
Ding!
It's good to see that at least one person on Slashdot is aware of how things in the outside world work.
Re: (Score:2)
The question is does the freight subsidize the passengers or the passengers subsidize the freight? Average passenger and baggage perhaps 250 lbs paying a hundred dollars for a flight compared to 250 lbs of parcels paying a dollar a pound, with those parcels needing way less support in the way of comfort, personal and such.
Re: (Score:2)
TFS also points out that a smaller bailout would have accomplished that.
If you just need a crapper, the base model will do. No need for the solid gold seat option and making it jewel encrusted is actually a negative value.
Re:Yes. Yes they were needed. (Score:5, Interesting)
It seems odd that the only investors in the market did not get any equity for their money.
During the 2008 financial crash, our Prime Minister at the time actually demanded exactly that from our banks when they came calling with their hands out.
Suddenly they didn't need a bailout after all.
Re: (Score:2)
It's remarkably easy to say a bailout was too big in hindsight.
Governing would be so easy if only we could see the future.
Re:Yes. Yes they were needed. (Score:4, Interesting)
Attach strings. The bigger the bailout, the bigger the strings. Then the companies being bailed out will compute the minimum necessary bailout for you.
Or do what they did with individuals, some now and if it's not enough, a second stimulus later.
Re: (Score:2)
The airlines took the money. The strings weren't that large. You say the money has been collecting for a year but surely you know Biden has only been office for 2 months. Who do you suppose was in office for the other 8 months? Much of the money has gone to keeping employes on the payroll and maintaining equipment and such in spite of little income.
Re:Yes. Yes they were needed. (Score:4, Insightful)
If we just stepped back and watch the airlines fail it would take a good chunk of the global economy with it.
Every subsidized industry ever has insisted that the galaxy will collapse into a black hole if their subsidies end.
If airline subsidies ended, many inefficient airlines would disappear while better-run airlines would gain market share. Ticket prices would rise to reflect the actual cost rather than the subsidized cost. Air travel would decline slightly. Taxpayers would have more money to spend on other things.
The world would continue to turn.
Re: (Score:3)
The airline industry wouldn't have collapsed. A bunch of airlines would have declared bankruptcy, lenders would lose a pile of money, some would go out of business completely, and the rest would reorganize and the world would continue.
An example of this sort of thing is the Iridium sat-phone constellation. It cost way too much to put those satellites in orbit and they couldn't recover costs, so they went into bankruptcy [wikipedia.org]. The people who funded the satellites lost a ton of money. The judge said it would be a
Re: (Score:3)
Hard luck, welcome to capitalism.
The airline companies' creditors should lose theirs. Including the shareholders.
Re: (Score:2)
The airlines needed to be kept alive throughout the Pandemic for essential travel. All airlines would have shut down, and the recovery process would have been much more challenging. Some things were done like paying flight attendants rather than laying them off which were not required, but addressed the initial objectives of limiting the unemployment rolls.
A lot of money has been thrown around in panic. Typically when that happens, only 30% goes to where it is actually essential; the evaluation is if the
Re: (Score:2)
Re: (Score:2)
And here's own nothing, produce nothing, contribute nothing, and has no stake in the outcome Libertarian neckbeard number 2.
Re: (Score:2)
I shaved yesterday.
Re:Yes. Yes they were needed. (Score:5, Insightful)
The money was needed because the airlines were poorly managed and did not have any sort of "rainy day fund". Be it cash or financing.
There should have been strings attached to the money so that airline executives had a very large disincentive to continue their poor management. Instead, they got huge bonuses while mismanaging the company, and then another huge bonus thanks to the bailout.
Something like "you can sell stock to the government" as the bailout, followed by some plan to divest that stock post-pandemic. Also, no stock awards to any employees for (insert period of time here), and no employee can exercise any already-awarded options for (insert period of time here).
Essential Air Service Program (Score:2)
Essential Air Service Program
Re: (Score:2)
It's right there in the summary. The bailouts were actually needed and they actually provided a social benefit. The question is did they need to be so large? Evidence suggests that they did not. All they really needed to do was allow the airlines to stand in place for the year, there's no reason they needed to provide a handsome profit.Just keep them standing and let them work for profits when the crisis is over.
Re: (Score:2)
It's really really easy to say a bailout was larger than needed in hindsight.
Re: (Score:2)
Without the bailouts there would have been a complete collapse of the airline industry that is constantly on the edge even in good years. The capital expenses of the airline industry -from top to bottom- is really extraordinary. The only way it exists at all is by being heavily subsidized by governments around the world, including in the US.
If we just stepped back and watch the airlines fail it would take a good chunk of the global economy with it.
This is crazy, but why not just not subsidize them, and force them to charge the real cost of a ticket?
What is the downside? Vacations and business travel are more expensive?
I don't give a flying fuck. Really.
Re: (Score:3)
Ultimately, in the long term, that would be fine. But there would be about 3-5 years of really pain throughout the economy as countless industries that have developed to rely on cheap air traffic turn over.
Would it be better in the long term? Probably.
Are house representatives elected for 2 year terms? Yes.
Will they let that happen? No.
Re: (Score:2)
Would it really? Why? Why have a heavily subsidized private industry if its so vital - why not have the government run it?
Re: (Score:2)
Hotels, museums, and other destinations have been receiving money from the word go.
Re: (Score:2)
The tourism industry got their bailouts too.
As did many other industries.
2001 memories. (Score:2)
So much like the car bailouts of years past will they have to pay the money back?
Re:2001 memories. (Score:5, Informative)
So much like the car bailouts of years past will they have to pay the money back?
The airline bailout was structured as 70% grants and 30% loans.
So they have to pay back 30%.
Re: (Score:2)
So much like the car bailouts of years past will they have to pay the money back?
The airline bailout was structured as 70% grants and 30% loans.
So they have to pay back 30%.
That figures. The car bailouts were much cheaper and probably didn't matter as much to the 1%.
Rich people love to fly everywhere, so surely they aren't going to make them pay it all back.
Re: (Score:2)
That figures. The car bailouts were much cheaper and probably didn't matter as much to the 1%.
Rich people love to fly everywhere, so surely they aren't going to make them pay it all back.
A new car costs thousands. Airline tickets to a lot of domestic destinations are under $100. Are you confused which of these benefits which income level?
Re: (Score:2)
Ina word No. (Score:3, Insightful)
"would have gone bankrupt" so? (Score:5, Insightful)
They'd have reorganized under another name and we'd still have airlines. They all operate at a huge debt level. And it isn't like we could survive zero airlines for long. Planes and airports already existing. Trained people to operate everything already.
This was creditor/stock holder bailouts, and people should be angry at them. We never see the whole picture, stopping at a convenient (early) spot to cast blame.
Re:"would have gone bankrupt" so? (Score:5, Interesting)
Exactly this - bankruptcy does not mean the assets all get set of fire in some kind of sacrifice ritual to Adam Smith.
Those planes would have been collateral and become property of some creditor, who would have immediately hired at least enough of the maintenance people to keep them in serviceable condition and enough pilots to at least ferry them to places they could be stored. Someone would have used them to start a new airline as soon as the pandemic was over maybe before. Us tax payers would have paid out unemployment to bunch more people but a drop in the pool compared to the amount already making claims and probably a lot less total dollars.
The only losers would have been holders of stocks and bonds in the existing companies. So yes we socialed the risk and privatized the reward. and you know what I STILL BLAME BUSH AND HANKY PANKY.
Their bailouts broke capitalism and responsible for kicking off a radical acceleration in the trend toward ever decreasing mobility.
Re: (Score:3)
I’m not sure you understand how many parts of the chain would be wiped out without keeping the airlines afloat. The (ultimate) owners of the hard assets would as well, since value of those assets would sink dramatically as other owners try to raise cash. These assets are all leveraged based on expectations that do not favor disruptions of this magnitude.
A few companies might have been sufficiently flush with cash to take advantage of the most lucrative long-term opportunities, but air travel would h
Re: (Score:3)
"Those planes would have been collateral and become property of some creditor..."
You are assuming liquidation. Even that is pessimistic. The airlines would have been reorganized and the creditors given equity in the new operations, which they'd rather have than getting the planes back anyway. The line workers would remain attached to their locations so the organization doesn't have to relearn it's own operations. The process would have given everyone cover for doing centrally planned cutbacks on flying inst
Re: (Score:2)
It's worth examining how other countries protected jobs during the shutdowns.
Some told employers "Don't worry about payroll, we will pay your employees, and you're barred from laying them off until this is over."
The US handed out a bunch of money and said "Have fun."
The rest of the US corona programs weren't much smarter. All of it looks like throwing money out at random. Most of the people who got "stimulus checks" (they're actually called "economic impact payments") never lost their jobs.
The way that exte
Re: (Score:2)
Planes and airports already existing. Trained people to operate everything already.
In general I agree with your sentiment, and it makes sense for a single airline going under while others are operating, but it starts to fall apart when all airlines are going under simultaneously. Particularly with the training aspect. Pilots in particular, due to the training and currency requirements in federal law essentially start turning into pumpkins after 90 days of not flying. The longer they are out of work the more retraining and recertification is required to get them flying again. Further,
Biggest beneficiaries? (Score:2)
AA isn't even remotely near the pre-pandemic levels, despite the bailout, despite the overall stock market shooting to incredible heights. It doesn't sound like they have benefitted from anything other than owning stocks in a company that didn't go bankrupt taking jobs and the transport sector out with them.
Saying this was just stock holders benefitting, or saying that the dollars went exclusively to saving jobs is incredibly intellectual dishonest at best, and ignorant at worst.
Re: (Score:3)
You can say the stockholders benefited disproportionately with hindsight, but at the time it was simply a lifeline. The unemployment systems aren’t set up to handle 40% unemployment rates... many things were done to avoid that outcome.
Re: (Score:2)
Yes indeed, that was my convoluted point. Putting this down to the rich get richer is incredibly shortsighted.
Depends. We'll know for sure later this year (Score:2)
Keeping these industries afloat puts them in a position to provide services and transportation as people start to go out and travel which in turns provides additional economic input and speeds a recovery.
I'm of mixed minds on these payouts and whether that much was necessary. However in extraordinary times like these, it doesn't seem wise to kinder a recovery and trash an entire industry by claiming some sort of poverty or fiscal restraint. The potential upside of getting "back to normal" greatly outweigh
Instead of giving the money to the businesses (Score:2)
Re: (Score:2)
Exactly... if you are going to hand out money inject it at the low end and it will circulate many times. Give it to the top end and it get locked up in investment assets or as you say lands in some offshore bank account.
However I don't think the gov't handing out money is ever a good idea. MMT is getting a lot of attention lately but what we are doing right now, helicoptering money, is NOT MMT. MMT recommends that in recessions/depressions the govt, instead of handing out free money, invests in infrastruc
Bailouts can be good, the way we do them is bad (Score:2)
Bailouts can be a good and needed thing. The idea of saving those jobs so the economy doesn't tank even more is an overall good thing. The problem is that the US gives bailouts like it is giving a kid some candy. The airlines need money? Here's a fat stack of cash to do with as you will. If we are going to bail out industries, we need to attach strings to that money to make sure it is used in a way that will be a net positive. You a want a bailout? Fine, but the money can't go to things like exec bonuses or
Re: (Score:2)
> There needs to be safeguard and conditions on the money when it is needed.
I like your idealism, but it's not like this wasn't heard loud-and-clear in the aftermath of the 2008 financial crash. In fact, Occupy Wall Street arose because of such shenanigans.
No, they knew damn well what they were doing when they wrote the "pandemic" "bailout". Our so-called "representative" government is a sham.
It is complicated. (Score:2)
Airlines are a strange company compared to say Technology.
There is a lot of expense to keep operating, and its margins are not so great. However they can't just shut down, for a few days like a factory, the aircraft do better while they are in the air. So while they may have a lot of money on hand, that can burn away very fast.
On the other hand. Airlines seems to have a very static business model, and figure they can keep doing business as usual and will get a bailout when something goes wrong. Well bu
Corruption (Score:5, Interesting)
The federal government redirects taxpayer money (which is not actually taxpayer money, it's taxpayer *debt*) to large companies who then provide "campaign contributions" and other benefits through their lobbyists. These companies are pillaging the country and mortgaging our future.
Not only that, but this sends the message to these companies that it is completely fine to run lean and maximize shareholder return at the expense of building a stable business which can weather hard times. The next time there's an issue with the airlines, or the banks, or whoever we will be right back here again. The only lesson anyone will have learned is that, as long as you have enough money to pay lobbyists, you can completely ignore economic and environmental realities because the government will just bail you out when things get difficult.
It has the side benefit of discouraging and wiping out any competition from small businesses as well.
Creating debt and weakening our economy, sounds about right for the type of people who get elected to federal office now.
Re: (Score:2)
We all know this intellectually, but let me tell you, when you actually see it up close it's still shocking how brazen the buying of politicians and senior bureaucrats and military officers is.
Surprise Factor Zero (Score:2)
Time to end protectionism in the airline industry (Score:3)
Its time (once the pandemic and all the restrictions on travel are over and people are flying again) to end all the protectionism in the airline industry (like the stuff that prevented Branson from doing what he wanted with Virgin America or the now removed laws that protected Dallas/Fort Worth international airport from competition by preventing airlines using Dallas Love Field).
Let the free market sort it out and as long as people want to fly, there will be airlines for them to fly on.
For routes that don't get the passenger numbers to be commercially viable on their own but that need air service, offer specific subsidies just for that route to encourage someone to fly it (with conditions that said operator not charge a fortune for the tickets).
I think helping out the airlines in the wake of the biggest drop in demand for air travel we have seen in a long time makes sense but there should have been a lot more strings attached to ensure the money went to helping the business survive the pandemic (and keep their employees paid and on the books and their airplanes and crews and others ready to start flying again when demand comes back) rather than any of it going to executives and top management or to shareholders.
The Con Is On. Again. (Score:3)
1. "Privatize Profits; Nationalize Losses"
When a major, unexpected event takes place [Covid-19, the 2008 sub-prime scandal, the market fallout after 9/11, etc.] we always seem to hear requests, pleas or demands from help from a number of industry sectors. Yet those same industries are entirely happy to not only book profits in good years, but to go to the ends of the earth to avoid paying corporation tax on those profits. Because the state and federal governments need funding, anything that the big corporations can avoid paying in taxes, we end up covering. It doesn't have to be that way.
For a start, there is no reason why the government couldn't "attach strings" to public money given out in time of crisis. We hear the term "the lender of last resort" to describe the Treasury, except in many cases the federal government isn't lending the money, it's giving it away. So it's long past time for a law that says that any distribution of public funds to private companies during times of crisis must be fully repaid by the recipient, with a nominal interest rate [say 0.1%] payable on the balance and a maximum period expressed either in generous chronological terms, [7-10 years] or in relative terms [within 36 months of the [economy/market sector/useful external reference] returning to pre-event levels. As tax-payers, we need to see much clearer guidelines - pre-reviewed and pre-agreed, that set out the conditions, limits, durations and amounts of funding that can be given in an emergency. We must not "trust" any individual government - no matter how well meaning - to "decide for themselves" who gets what or how much. For example, look at the Covid relief package and look at how national hotel chains re-classified each hotel location as a separate business entity in order to come in under the arbitrary "500 employee limit". Are we really expected to believe that no legislator asked, "Hang on, can companies game this system?" and bothered to think about it? Really?
2. "Too Big To Fail"
How many times have we heard this excuse given as a justification for the use of public funds to bail out companies or an industry sector. Remember 2008 and the big banks? This time it was the airlines. The nonsense explanation is that these companies are somehow so significant in the economy [reminder, in 2019 US GDP was $21.43 trillion] that we have no choice but bail them out, otherwise some terrible harm will befall the country.
Of course, this fabrication is an attempt to hide an even bigger lie - that the entity charged with making sure that no one company in any market grows too big to fail, i.e. the federal government! - has yet again be found to be asleep at the switch. This is one of the most egregious arguments that governments use to keep us "on the back foot" after an emergency. After 2008 we should have expected the Obama administration to enact significant, strict anti-competition laws that limits companies to say 5-10% of a market. A little healthy competition is good for *everyone*. Or so we're told when it's us competing for jobs, promotions, bonus payments, etc., etc.
3. The Long-Term Harm
After markets took a dive in 2001, people left in work were told [for years] "No pay raise this year, we're still trying to recover the company - and you sholud just be happy that you've got a job..." and that continued right through to 2008, when the explanation became, "No pay raise this year, we're still trying to recover from the global impact of the sub-prime scandal..." Except now we're being told, "No pay raise this year, we're going to be paying our way out of the Covid-induced economic doldrums for several years yet.
Except, of course, that things were peachy e
No (Score:2)
The year before the pandemic, airlines shelled out billions of dollars to buy back their stock. Then, when the pandemic hit, they plead poverty. During the entire year, not one airline, that I'm aware of, cut the salaries of those at the top.
The same with all those other multi-billion dollar corporations. They continued to live the high life buying back stock, shelling out millions in salaries and bonuses, all the while coming hat in hand to the taxpayers, AGAIN, for money.
It is not the responsibility of
That's the game plan. (Score:2)
"It is fair to say that we socialized the airline industry's losses and largely privatized the gains."
That's straight out of the republican game plan.
Are airlines really needed (Score:2)
Over 90% of travel could be eliminated and the world wouldnt end. Business travel is just a bunch of corporate aresholes, that arent making things better for starters.
Re: (Score:2)
I think maybe you're confused about who was president in March 2020.
Re: (Score:2)
Re: (Score:2)
So you haven't been paying any attention at all to the financial issues that have been occurring for a while now, and just start calling everyone who points out things can are easily verified by looking in to what happened with the banking bailout and call them "neckbeard Libertarians" when you are apparently ignorant of the entire dynamics. Good job young troll. Now see if you can hoist that club without hitting your head again.
I added as much to the conversation as the parent which spoke in blanket "always X never Y" analysis with no nuance or citation.