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The federal government is rolling out a $2 trillion bailout to try to blunt the effects of the nationwide coronavirus shutdown. Much of that money will go to big business, while working-class and middle-class Americans could earn a few thousand dollars at most. Very little has been done to care for site workers, freelancers and consultants who have seen contracts canceled or drastically reduced, and clients evaporate. Perhaps it could have been better spent on bailing out student debtors.
Many of the businesses that will benefit from the bailout appear to be operating to defraud taxpayers. Hilton Hotel Corporation, for example, engaged in a $2 billion share buyback on March 3, by which time it was more than obvious that they would experience a drop in activity. The coal industry sought to use the bailout to evade a $220 million tax intended to benefit former coal miners with black lung disease. And airlines have begged for poverty despite spending 96% of their free cash flow on stock buybacks over the past decade, according to Bloombergagainst an average of 50% for the S&P 500. And these same airlines are estimated to have a full six months of cash with which they could continue to pay wages.
And if that’s not frustrating enough, get this: executive compensation for bailout beneficiaries is capped at just $3 million plus 50% of anything they earned above $3 million in 2019. This theoretically means the CEO of American Airlines, who earned $12 million in 2018 (2019 figures are not yet available), could still earn $7.5 million in 2020 even as his company benefits from taxpayers’ money.
Since the reduction in corporate tax rates in 2018, large companies have benefited from to the tune of some $1.5 trillion under the Trump administration. In a nutshell, big business has already had a free ride and doesn’t deserve this bailout. Much of the government’s spending in the coronavirus bailout appears to be less aligned with helping the American people financially through hard times or improving coronavirus survival rates, than with underwriting years irresponsible corporate behavior.
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Perhaps there was a better use of $2 trillion than corporate welfare. If the goal is to pump money into the economy and give Americans a financial cushion to get them through the coming months, a better decision might have been to cancel some or all of the $1.4 trillion in student loan debt which is owned by the federal government. That would have left another $600 billion for other purposes while instantly reducing spending for millions of Americans and freeing up their money for other uses, such as paying rent and supporting struggling local restaurants and of their employees. Even a partial student loan forgiveness could have paid dividends to recipients for years to come.
And it’s not like we don’t know how to do that either. Senator Elizabeth Warren (D-MA) already have a plan for that, on which she campaigned. The fact that even partial student debt relief was not included in the coronavirus bailout is a travesty. It is money that is owed to the federal government, and the federal government can choose to collect it or not. Instead of writing paltry checks as part of a bread and circus policy — $1,200 doesn’t go far in New York, which is the epicenter of the coronavirus crisis — this could have been an opportunity to blow up the economy while creating lasting and high impact improvements in the financial lives of millions of Americans.
While many are simply desperate for financial help right now, this was, in my opinion, not the right way to do it. That this bill passed the Senate with overwhelming bipartisan support speaks not only to the dysfunctionality in Washington, but also to the fundamentally bankrupt values of most members of both parties. Congress’s primary goal seems to be to line the pockets of corporations, not the citizens who always seem to be footing the bill.
Correction: The original version of this article misrepresented the cap on executive compensation for bailout recipients. Executive compensation is effectively capped at $3 million plus 50% of what the executive earned above $3 million in the previous year. The TPM regrets this error.
benjamin reeves is a New York-based freelance financial journalist and screenwriter. He writes the daily newsletter “Highly transmissible. Reeves previously served as special projects editor for “Worth” magazine, worked in communications at Columbia Business School and served as a foreign correspondent in Latin America.