Because bailouts (usually) make the government money in the long run. They're in the form of low-interest loans, they aren't just handing out money to corporations.
Do you think subsidizing the poor enough so our economy doesn't have to choose between immediately collapsing and killing the poor wouldn't save us an enormous set of costs?
I absolutely think we should do that. The problem is it's extremely hard to quantify that cost/gain, while its extremely easy to quantity the cost/gain of low-interest loans.
Not to say its impossible, or that we shouldn't try--we should. But when you have a bunch of senators arguing, it's easier to point to the easy numbers.
Is it really that difficult to quantify or is it that the government doesnt want to do the work of quantifying it?
I think you said it yourself with your comment about senators arguing. The root cause is an overall lack of political will, not any technical or logistical impediments in modelling impact.
It's less political will than not having simple competence in any arena other than the political that got them there. Throwing gobs at cash at a broken system is what keeps Congress employed. If we had an unemployment system that didn't try to use "one size fits all" numbers, required two minutes on your phone to get enrolled, and two minutes on the employers' part to verify your application, then we wouldn't have have need of a significant number of government employees, and Congress's role wouldn't exist to posture about caring, but instead to simply fund a functioning system simply needed cash.
> It's less political will than not having simple competence in any arena other than the political that got them there.
The U.S. Census, GAO, and various other bureaucratic organizations (USDR, EPA, etc), all seem to be quite competent when it comes to performing studies and gathering data.
So is the IRS, Department of Defense, etc.
Of course there are lots of problems, but the U.S. Federal Government has plenty of agencies able to competently perform some sort of study.
It probably would. But solving that problem is significantly harder than putting out loans to large companies that employ thousands of people. If the airline industry collapsed, many other things would've followed. Certain industries are absolutely essential infrastructure to the economy and cataclysmic events can have massive ripple effects.
Whatever happened to doing worthwhile things because they're hard? Do you know how hard it is to have to quarantine yourself from your family because you've been deemed an essential worker, while getting seemingly nothing in return? Do you know how hard it is to live with the guilt of even possibly infecting others with COVID?
Clearly, the current administration puts corporate profits over the lives of Americans. Clearly, the current administration is allergic to hard work. Hopefully, Americans can send the message in November that there's no room in our government for people like that.
> Whatever happened to doing worthwhile things because they're hard?
People realized that was idiotic? Don't celebrate that someone accidentally did something worthwhile for a terrible reason. Target your efforts at doing things that are worthwhile, not at doing things that are hard.
>Don't celebrate that someone accidentally did something worthwhile for a terrible reason.
Doesn't track with this.
>Target your efforts at doing things that are worthwhile, not at doing things that are hard.
I think you're missing nuance.
I say, condemn those who lazily do the easiest jobs that don't interrupt their sleep at night.
Rather, we should all be trying to make the greatest positive impact within 40 hours of work a week. Those who do more are being taken advantage of one way or a dozen. Those who do less are taking advantage.
By setting a floor and a ceiling we limit abuses on both sides and,hopefully,better distribute labor.
Also,doing things that are hard for the sheer sake of it is not idiotic. It can be a positive characteristic, just like avoiding difficulty is a negative one.
Like others have said, I think you're missing the point. In the past we've done something specifically because it was hard (going to the moon) but it would be a controversial statement to say it was done accidentally or for a terrible reason. For example, the state of computer science wouldn't be nearly where it is if it wasn't for going to the moon specifically because it was hard.
> In the past we've done something specifically because it was hard (going to the moon) but it would be a controversial statement to say it was done accidentally or for a terrible reason.
I don't think it would be especially controversial to say it was done for a terrible reason. We didn't do that specifically because it was hard; those are just words from JFK's speech. We did that because the Soviet Union had beaten us to putting a man (and a satellite) in orbit, and we thought it was crucially important to beat them to something related.
And in the resulting flurry of science that came from JFK's speech, we got many amazing and good things. The easy thing to do is say "space doesn't matter" like many countries have chosen to do. We did it even knowing it was hard, because the benefits outweighed the difficulty.
What is "terrible" about advancing science and putting humans in space?
Yes, the real reason was in fact terrible. Doing something because you feel pressured to win a race against another country is a really bad reason to do that thing.
The loss of jobs and income is going to have cataclysmic cascading effects, worse than if a few large companies had gone under. It hasn't even started yet.
What's there to link or elaborate? Look at the number of people applying for unemployment (I looked it up for you [1]). With a record number of people on unemployment and no real end in sight to the pandemic, something has to break.
Basically, it doesn't matter how quickly we re-open if people don't have any money to spend, don't feel comfortable spending, and aren't leaving their homes.
Bailouts usually make the government money in the long run if you ignore the costs.
Let's say the market rate for a loan like this is 4% and the government is loaning at .5%. Sure, the government has "made" .5% (less any defaults), but by any realistic understanding of what's going on, they lost 3.5%.
The government goal isn’t to pursue good investments at a market rate. They are trying to prop up companies that investors don’t want to touch because of their current risk of failure. Spending some money now to keep a company in business can pay off in the long run, for example saving money on unemployment.
I absolutely agree, the government can certainly have other goals other than making good investments.
But don't muddy the waters by saying that they are making money on the program if they're giving below market loans. They might have good reasons to do it, but they're not making money on the deal.
They are making money though. The government doesn't make money for the government. It's not like a corporation. The government makes money for the country. Saving existing institutions from collapse during a disaster tends to be a very good investment for that.
When the Fed creates $xxx billion it "makes" money. The real question is whether the Fed bought something worthwhile.
The fact that a market coalesced around the asset isn't that significant because the Fed can't withdraw from the market now without watching prices for the asset collapse.
The point of my argument is that the government can save money by keeping a company from folding. Having a bad return of a couple hundred million is better than a loss to society of larger proportions. My point is to avoid the whole, a penny wise and a pound foolish, thing.
Well, pretty much all the bailout money requires that the business not fire anyone (or re-higher anyone that they did fire). For example, thats how the small business portion of the CARES Act worked.
The recent airline loans/bailouts require maintaining the same staff until September 30th.[1]
I would imagine that there will be layoffs once that requirement expires.
Whether you read the statement as malice cloaked in corporate doublespeak, or simply following the rules that were laid out, there's no need to imagine. United, at least, has already warned that layoffs will happen October 1st.
"""But the challenging economic outlook means we have some tough decisions ahead as we plan for our airline, and our overall workforce, to be smaller than it is today, starting as early as October 1."""
-Oscar Munoz, Chief Executive Officer, and J. Scott Kirby, President,
So the government is just punting on problems, again?
Serious question. I fail to see how bailing out mismanaged companies is worth more than an equivalent sum straight to people. Companies can be nationalized if they're essential. Can't raise the dead. Can't squeeze blood from a stone.
I don’t support bailouts of mismanaged companies, and I do think that sending money directly to the people helps substantially. A company not doing well during COVID-19 isn’t necessarily because they were poorly managed. Giving people money, and also keeping companies afloat helps on two fronts. People can survive now, and people still have a job to walk back to once this is all over.
Of course bailouts from the Fed "make" money. When the Fed increases its balance sheet by $2T, it "made" $2T. Indeed if it devoted the entire bailout to buying paperclips or Renaissance art, or S&P500 common stock, the prices of those things would go up (or go down less). However, the question is whether the Fed is buying things that are in the public interest.
>They're in the form of low-interest loans, they aren't just handing out money to corporations.
This is false as related to the PPP loans ($700B program, to put that in perspective during the 2008 financial crisis law makers passed an $800B stimulus to prevent total financial collapse). Its argued the banks paid that 2008 money back with interest (I won't touch that claim), but the PPP loans ($700B) are intended to be forgiven.
>>> Our Quantitative easing and corporate bailouts
>> Because bailouts (usually) make the government money in the long run. They're in the form of low-interest loans, they aren't just handing out money to corporations.
> This is false as related to the PPP loans
GP was comparing unemployment to QE and "corporate bailouts". Forgiveness of PPP loans is contingent on keeping staff on payroll and salary levels constant. So it's very much targeted at helping main street. In this sense, the intended use of PPP loans was closer to augmenting unemployment than a corporate bailout.
To the extent that PPP loans have actually gone to small businesses, my impression is that that's mostly worked out -- it's basically unemployment without the lack of employment. To the extent that they haven't, the federal government should find a way to retroactively claw back abuse and/or exclude abusers from future rounds of assistance.
BTW, worth noting that the PPP loans aren't really a handout if they're not paid back; their interest rate of 1%. Rates of return on fixed income are super low right now.
>Forgiveness of PPP loans is contingent on keeping staff on payroll and salary levels constant. So it's very much targeted at helping main street.
Helps main street? Businesses just got free money from taxpayers. Sure for the forgiveness you have to spend 75% on payroll, in many instances what the amounts to is a business owner paying themselves 8 weeks of salary with taxpayer money and then that loan being forgiven. In the instance it actually goes to employees, again taxpayers basically just paid for 8 weeks of your payroll (these helps politicians by keeping unemployment numbers artificially low for 2 months, and keeping people off the temporary Covid unemployment benefits), the jury is still out if any of these employees will remain employed after 8 weeks (or we will see unemployment again be flooded with millions of applicants, only the extra $600/week won't be there).
>my impression is that that's mostly worked out
Its as much of a scam as the NINJA (no income no job applications) were leading to the financial crisis, people just formed businesses made up salaries and got a free 8 weeks of said salary (up to $100k salary). Or the fact that law makers and their families have specifically been exempt from any ethics review for conflict of interest, and in some cases law makers set up brand new companies just to obtain PPP loans.
> again taxpayers basically just paid for 8 weeks of your payroll
Sorry, I don't really understand why this is a problem. The alternative would be laying those people off and paying them via unemployment anyways, right? The idea was to keep people tied to their employers and keep otherwise productive businesses in tact in order to enable a quicker recovery. Digging into today's jobs numbers confirms this was largely successful: the bounce in employment was mostly ended furloughs.
> people just formed businesses made up salaries and got a free 8 weeks of said salary
Now you're just making shit up. Businesses had to exist prior to February 15, 2020 and the amount received is computed based upon payrolls from Jan 1 to Feb 15 2020. If people are doing this, they are putting a lot of effort into intentional fraud and are 100% going to end up in jail.
>Sorry, I don't really understand why this is a problem. The alternative would be laying those people off and paying them via unemployment anyways, right? The idea was to keep people tied to their employers
If the alternative was laying people off, that is the free market at work. And there is no "keeping employee tied to their employers" as you claim, it is just free money to businesses for 8 weeks of payroll (+25% extra for non-payroll expenses like rent - so taxpayer paid rent for businesses, where is the taxpayer paid rent for taxpayers?). There is no promise or guarantee business will keep employees or even remain open beyond that 8 week period.
Finally, and most importantly, you touch on it:
>paying them via unemployment anyways, right?
Yes, this was about: 1) free money to businesses and 2) hiding the real unemployment numbers.
It was not about employees, if it was there are much better ways to go about it. At minimum law makers wouldn't have been allowed to pass the bill, create a brand new business, and obtain PPP loans for these new businesses (which would normally be prohibited, but both law makers and their family were excluded from these prohibitions against conflict of interest)
The economic shock was caused in part by a government-imposed shutdown of economic activity in response to a pandemic.
> There is no promise or guarantee business will keep employees or even remain open beyond that 8 week period.
Which is why another aid package will probably be passed in July. The initial aid package was not intended as a one-time fix. Even as the legislation was being drafted, its key sponsors were stating that a follow-up package would be required in the summer.
> At minimum law makers wouldn't have been allowed to pass the bill, create a brand new business, and obtain PPP loans for these new businesses
Again: businesses had to exist prior to February 15, 2020 and the amount received is computed based upon payrolls from Jan 1 to Feb 15 2020. If people are doing this, they are putting a lot of effort into intentional fraud and are 100% going to end up in jail.
>The economic shock was caused in part by a government-imposed shutdown of economic activity in response to a pandemic.
No, the economic shock was caused by businesses being over leveraged and not having cash reserves. I keep hearing how this was the greatest economy the World has ever seen, how good could it really be if businesses are existing paycheck to paycheck?
>Which is why another aid package will probably be passed in July.
Exactly why taxpayers and not businesses should have received the lion share of the bailout funds.
>businesses had to exist prior to February 15, 2020
Look up shelf corps or ready corps. There is rampant fraud with respect to the PPP loans, including by law makers, none of them will end up in jail.
> No, the economic shock was caused by businesses being over leveraged and not having cash reserves.
A lot of these businesses didn't have much cash reserve because they were launched by ordinary folks and operate in industries where the profit margins are razor thin. If you're running the local pub, there's simply no opportunity to build up capital reserves that can survive a several-month-long shutdown. Even cutting payroll down to a minimum, rent, utilities and minimal maintenance is expensive.
I don't think there's a reasonable argument to be made that wiping out the current owners of bars, coffeeshops, garages, gyms, etc. is going to result in more resilient or more competent locally owned businesses in the long term. I just don't buy that there's a massive amount of well-capitalized individuals ready to run bars/coffeeshops/garages/etc. better than the current owners.
That said, there is a critical mass of super well-capitalized and competent restaurant/bar/coffeeshop management machines, which can take over if all those local businesses fail.
The effect of the policy you're suggesting would be the walmartification of the last remaining outposts of local ownership in most economies.
You're partially correct. The PPP program is meant to be at least partially forgiven, but only businesses with under 500 employees qualify for it in the first place, and the loan has requirements for which it can be used for [1].
The airline bailout was apparently complex and not all of the info seems to be public [2].
Some of the bailout loans might break even, but this is only some of what is going on. The paycheck protection loans get forgiven and are essentially just handing out money (with the caveat that it goes to labor costs). We also handed out $210 billion in tax cuts which is just a handout.
On the whole the fed's balance sheet actually went up by 4 trillion dollars during the 2008 recovery [1] even though the loan program was less than 1 trillion. There is a trillion dollars of mortgage backed security purchases there that are a less visible bailout. The fed has already added 2 trillion this time with more to come.
In 2008, the US Gov't made hundreds of billions on the bailout loans they gave.
Let me make that clear. Whenever people say "Wall St was bailed out by the taxpayers", they don't understand finance well enough to know that the taxpayers actually earned a significant PROFIT from that bailout.
...and naturally the media doesn't report on that important detail.
"socialize the losses, privatize the gains" is a slogan based on complete ignorance.
Since at least some of those companies were insolvent, the US taxpayer would have been better compensated if the companies had been nationalized instead. Wiping out the existing shareholders avoids moral hazard in the future as well.
That's a horrible bar to be deciding who gets a bailout. By that logic, perhaps he should eliminate the safety net because handing out money to poor people isn't "profitable".
