Today, the Chicago Tribune published an editorial titled, “Why government bailouts for United and Boeing are a bad idea.”
The essence of the editorial is: Unless everyone gets a piece of the pie, no one should get any pie. We all should starve.
Here are a few excerpts:
Treasury Secretary Steven Mnuchin has struck a deal in principle to deliver billions in financial assistance to United Airlines and other carriers to protect them from coronavirus fallout.
A similar package appears to be in the works for Boeing. These exercises in corporate favoritism are a bad idea.
We’re not rooting for any company’s failure, nor for hardship to befall employees of any industry. Rather, we’re opposed to the idea of the federal government using portions of the $2 trillion coronavirus rescue package to support and protect major players in specific industries.
In other words, the Tribune is rooting for company failure and for hardship to befall employees of the airline industry.
Why “major players” and “specific industries” should not be helped never is discussed. Is it that the Chicago Tribune is not one of the “major players,” and is not receiving enough help?
Would it be better for “major players” and “specific industries” (who employ millions of workers) not to receive any help?
If the point were that money given to “major players” is being taken from “minor players,” you might agree with the Tribune. But that isn’t the case, at all.
The fact is that a craven, inept, GOP Congress has not allocated enough money to deal with the pandemic and its effect on the economy. Because there is too little money, it mathematically is impossible to give some to all who need or deserve.
In giving to the airlines, Congress has elected to save what it believes to be one of the more crucial industries. You may disagree with that selection. You may mention other industries you believe are more deserving.
But when you have a “too-little, too-late” President and Congress, you are faced with the Hobson’s choice of giving to some or giving to none.
The entire country has been knocked on its heels temporarily by the pandemic. Millions of Americans have lost their jobs, been furloughed or taken pay cuts.
Small business owners, notably restaurateurs, are suffering, and some will seek access individually to emergency loans. The retail, resort, sports, arts, and energy industries are getting crushed. Again, who isn’t besides Amazon?
Yet Boeing and the airlines — and by extension, their shareholders — get singled out for dispensation?
Yes, the airlines won the lottery. Now, shall we march in the streets demanding that airlines not receive any help, and instead should go bankrupt? Will that lift the economy?
The Tribune is fighting the wrong enemy. The enemy is not the allocation of funds. The enemy is insufficient funds.
The deal in principle for Chicago-based United and other airlines, announced Tuesday, would offer up a mix of taxpayer grants and loans to help the companies keep operating and make payrolls.
Just as a reminder, there is no such thing as a “taxpayer grant.” This is part of the Tribune’s endless promulgation of the “Big Lie,” — the lie that federal taxes fund federal spending.
Unlike state and local taxes, which fund state and local government spending, federal taxes fund nothing. They are destroyed upon receipt. Even if the federal government were to stop all tax collections, it could continue spending, forever.
That is the fundamental difference between federal government (Monetarily Sovereign) financing and state/local government (monetarily non-sovereign) financing.
Also, federal loans are ridiculous on their face. The federal government never should lend. It only should give.
When the government gives, it adds growth dollars to the economy. But when it lends, it removes growth dollars from the economy, at the instant it receives repayment — and it destroys those repaid dollars.
A similar offer is under discussion for Chicago-based Boeing. President Donald Trump and members of Congress apparently want to attach conditions to the aid, including requirements that the companies hold off on layoffs.
Another significant demand: giving the government an option to take an ownership position in exchange for the financial assistance.
The first requirement is reasonable. The government is saying, in essence, “We want to save jobs, so we will give you money for you to use in payroll.”
The second requirement is hypocritical for our right-wing government because taking an ownership position is socialism.
All those GOP Congressmen, who hate any sort of federal support for Medicare because it supposedly is “socialism” (It really isn’t), now want to take an ownership position in airlines??
Is the plan for the federal government, as the owner of certain airlines, to compete with privately-owned airlines? Or put another way, shall we allow an entity having unlimited funds and no need for profits to compete with the private-sector?
Really, really bad socialist idea.
Final terms of the United aid package weren’t released as of Tuesday afternoon. Assuming the Trump administration must go forward with bailouts, extracting ownership stakes so taxpayers might benefit from the economic recovery would make these unsavory transactions fairer.
But wouldn’t you know it, Boeing and the airlines hated that idea. They’d much rather receive the money as a blank check, thank you very much.
Again, the Chicago Tribune editors demonstrate remarkable ignorance of economics, though they persist in writing about economics.
Taxpayers do not benefit from government ownership of anything. Taxpayers benefit only from tax reductions, which can be given regardless of ownership.
As to whether Americans would benefit from improved service with government ownership and management of airlines (i.e. socialism) is a subject for debate. But there is no tax benefit.
Boeing, a government defense contractor and one of two global airplane manufacturers, is the country’s largest overall exporter. Air travel is critical to the economy. No question, the aviation industry is important.
But if high status is an argument for government intervention, it is also a reason why these companies should be able to manage COVID-19 headwinds with their own bank loans and other sources of capital.
Being non-expert in airline finances, the Chicago Tribune has made the moral (not business) decision that the airlines should be able to weather the COVID-19 storm without federal assistance.
How does the Tribune come to this conclusion? Not with any financial figures. It’s just a feeling in their bones.
We’re remembering back to the dark days of the 2008 financial crisis, when Warren Buffett stepped in to protect Goldman Sachs by investing $5 billion. Both sides benefited.
That type of private transaction is available to Boeing, United and the others, assuming they are healthy enough to survive. If they aren’t, why should taxpayers save them?
Again, the Tribune demonstrates it doesn’t know what it is talking about. The Tribune claims that because Warren Buffett helped Goldman Sachs, the airlines can get the same kind of private help, no strings attached. The Tribune just knows this — somehow.
And if the airlines can’t get that kind of help, they don’t “deserve” to survive, so we should let them go bankrupt? It’s a moral thing, not an economic thing. Right?
This is what passes for “thinking” at the Chicago Tribune.
Boeing CEO David Calhoun has addressed some of these issues in television interviews, but his responses have been contradictory.
“If we need to pursue other options in private markets that are a little more unusual, we will. I don’t think we’ll get to that, but we’ll do what we have to do, and we’ll protect the long-term outlook for our shareholders.”
Indeed, this negotiation is about the shareholders. They should be rewarded for the risks they take investing in public companies, but they also should suffer the consequences for failures.
The Tribune claims it is better for shareholders to suffer because of the COVID-19 virus, than for the government to step in. Why? As punishment for . . . being shareholders?
What about the employees; should they be punished, too? And is this true for all industries? Should every industry be punished by COVID-19 for failing to anticipate the federal government’s total ineptitude in the face of a predictable, worldwide threat?
Has the Tribune just expressed the Libertarian / Tea Party belief that any federal spending is bad?
And what about smaller businesses. Should they, their owners and their employees be punished, too?
Really, what is the Tribune’s recommendation? No government action?
Competition creates stronger companies that provide more valuable products and services to customers. Competition also weeds out the weak.
Since airline deregulation in 1978, individual carriers have succeeded and failed, but the public overall has benefited from lower fares, more destinations and safer skies.
A government rescue destroys the competition proposition.
This is not a rescue from competition. Competition didn’t cause the coming depression; the government’s ineptness is causing the problem and the government needs to solve the problem.
To blame the current situation on not being able to compete is the height of ignorance.
And by the way, in addition to “lower fares, more destinations and safer skies,” competition also has given the public more crowded planes, smaller seats, no food, and ticketed flyers being bumped.
I’m old enough to remember when flying was a pleasure. Now, you have to fly a foreign airline like Emirates for that pleasant flying experience. But that’s a story for another blog post.
But hey, rather than save the economy, let’s punish the airlines. That’s the Tribune’s “plan.”
We aren’t eager to see bankruptcies. But they may be inevitable because we don’t want Washington lawmakers using taxpayer dollars to pick private-sector winners and losers. In today’s treacherous circumstances, Boeing, United and the others need to find their own ways forward.
Again, the Big Lie. No “taxpayer dollars” are being used. All federal taxpayer dollars are destroyed upon receipt, and new dollars are created, ad hoc, each time a federal creditor is paid.
Why did the airlines appear to get their way? Capitol Hill operates on a system of clout and fear, and the airline industry can leverage both. This ends up being bad for the American free-market system.
If Congress and the administration swoop in as savior, they are absolving executives of past mistakes. They are telling them they are free to take more big risks and not fret about the consequences because they’ll be backstopped by the government.
Boeing, United and the airline industry should be forced to do what millions of entrepreneurs and mom-and-pop businesses are doing: adapting to a traumatic but necessary shutdown of the economy and figuring out how to survive — without a generous rescue from taxpayers.
The above might be true if we weren’t dealing with an extraordinary situation. Before this pandemic, the airlines and every other business in America were not coming to the federal government, hat in hand.
Only when the federal government completely fumbled its response to the pandemic, have the airlines and all other companies asked for help. Isn’t that the purpose of government? To step in when it screws up, causing the entire private sector to need help?
Now the Tribune editors suggest this all is the airline’s, and all other companies’ fault for not holding back trillions in cash so they could prepare for the next worldwide tragedy and the subsequent failures by the federal government.
What a foolish way to run a business that would be. What a foolish way to run a government that would be.
With that kind of business logic, no wonder so many newspapers have gone out of business.
Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell
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THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.
The most important problems in economics involve:
- Monetary Sovereignty describes money creation and destruction.
- Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.
Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:
Ten Steps To Prosperity:
2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)
4. Free education (including post-grad) for everyone
5. Salary for attending school
6. Eliminate federal taxes on business
7. Increase the standard income tax deduction, annually.
8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
9. Federal ownership of all banks
10. Increase federal spending on the myriad initiatives that benefit America’s 99.9%
The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.
MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 
Trump wants to open the economy May 1. Money, in effect, is more important than people. This is how desperate Trump is to get his agenda started. There may be another hidden agenda.
Let’s say he fails and we stay in shutdown mode. Little revenue is taken in. Companies lose money and close up shop. BUT government is forced to shell out unemployment checks, even if no money is coming in. This “should” be the point at which MS is forced into collective consciousness. I don’t see any other way out, nor any way to diguise the fact that MS would work 100% effectively.
MMT relies on employment, so forget that. But MS is independent of employment. Call me overly suspicious, but perhaps someone is telling Trump to do whatever it takes to keep the concept of monetary sovereignty from gaining traction and success.
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