Covid-19 UPDATE: Corporate Bailouts and Food Pantries

Written By:  Arnie Olsen

Back on March 22nd, I published an article breaking down what a corporate bailout would mean for the 4 largest airlines in America.  Since that time, the CARES Act has gone from first being introduced in the Senate on March 19th, through very public negotiations and eventually to being signed into law by the President on March 27th.  Now, 19 days after I published my original article, I thought it would be useful to provide an update.

If you have not read it, you can find my original article here:

What A Corporate Bailout Really Means

There were many components to this law, and if you have not done so, you can read the full details here:

The CARES Act (Full Text)

In general, there were several main components.  Among these were:

  • $500 Billion for loans to specific industries hurt by the Covid-19 Health Crisis, including the airline industry;
  • $250 Billion for small business loans through the SBA to help businesses with less than 500 employees, to help them retain employees on payroll during the various stay at home orders;
  • Enhanced unemployment benefits to expand eligibility to people like gig workers who normally do not qualify for unemployment, as well as an additional $600 per week on top of the standard unemployment compensation someone would qualify for (for up to four months).
  • A one time $1,200 direct payment to nearly every American adult and $500 for each dependent child.

The total price tag for this relief bill is approximately $2.2 Trillion, or in other terms, based on an approximate U.S. population of around 330 million, just shy of $6.700 for every man, woman and child in the United States.

Since that time, between the talk of needing to hurry up and “re-open” the economy, I am seeing an increasing number of people focusing on the reality that some people will actually receive more on unemployment because of the extra $600 per week and how unfair that is to people who are still required to go to work and risk their own health.

I won’t try to tell you that it’s not unfair, but I will suggest that you don’t aim your frustration at the people receiving the extra $600.

We have a long history in this country of looking around and seeing other people receiving something that we are not, and getting angry at either the people receiving the perceived benefit, or at the lawmakers who are responsible for giving it to them.  In my mind it is basically a first cousin to the old analogy of “when I was a kid, I walked uphill both ways to school in waist deep snow year around” or similar.

There is also a often quoted statement by Lyndon Johnson to Bill Moyers,

“If you can convince the lowest white man he’s better than the best colored man, he won’t notice you’re picking his pocket. Hell, give him somebody to look down on, and he’ll empty his pockets for you.”

While that comment was made more in response to racism, it still applies to our situation today, with or without the racial component.  Too many people believe that they are better than others beneath them economically, and it is those people (and specifically the “handouts” they receive) that are the cause of the unfairness they feel in their own lives.

One way or another, we have got to change that way of thinking because it is EXACTLY what the people who actually ARE picking your pockets want you to believe.  Does that mean that every single politician is trying to pick your pocket for the benefit of the wealthy and the corporations?  NO, it most certainly DOES NOT.  There are still a lot of altruistic motives among many politicians, though I would argue that even they are stuck in their own version of Groundhog Day, and keep repeating the same things that have been done for decades, in spite of the best intentions.

That brings me to the airline industry.  Clearly, it is vital to the American economy, both because of the service they provide to our society, enabling the flow of commerce 365 days a year, as well as the 750,000 or so the airline industry employs directly (plus the hundreds of thousands of additional jobs that are closely tied to the airlines), and as such, it is critically important to make sure the industry survives this health crisis.

What I will continue to argue, however, is that the CARES Act, as with virtually every other example of taxpayer funded aid is structured completely wrong, and this is where you should be directing your anger…at the people who pushed this legislation, the Senate Republicans, led by Mitch McConnell…not at the waitress or Uber driver getting an extra $600, and not even at the Congressional Democrats that slowed things down by a few days and actually made sure there were some things included that would help people like you and me.  NO, this lies directly at the feet of Senator Mitch McConnell, the 52 other Republicans who made the $500 billion corporate bailout their first and top priority, and the President who is now flatly rejecting even the minimal oversight of that spending that was forced into the legislation by Nancy Pelosi.

In the 19 days since I published my original article, and the 14 days since the CARES Act was signed into law by President Trump, how many of you have received your $1,200 payment?  How many of you have been laid off or furloughed and actually received your first unemployment check?  How many of you have been able to navigate the process and apply for the extra $600?  For that matter, how many small businesses have even been able to secure the loans that would enable to keep their people employed?

While I am sure the answer to those questions in not ZERO across the board, it is ZERO for many.  That’s not to say it will not come eventually, and that it will not be helpful when it does, but in the meantime, this is what we have:

San Antonio Food Bank Line (4-10-20)

PHOTO CREDIT:  William Luther - Express News
Published in the San Antonio Express News (4/10/2020)

That photo was taken on Thursday, April 9th outside of a food bank in San Antonio, TX where 10,000 people lined up looking for help.  THIS is what WE have gotten so far.  THIS is what happens to people who live paycheck to paycheck, work their asses off, and then lose their job through no fault of their own.

At the same time, during those same 19 days since I published my last article on this subject, when the CARES Act was being negotiated and Mitch McConnell’s and President Trump’s intent to provide $500 billion in interest free loan relief to the airline industry, cruise line industry and a few others, another group of people has had a VERY different experience.  These are the “insiders” that hold a vast number of shares in the 4 largest U.S. Airlines, airline employees (pretty much all executives and upper management) that have NOT missed a paycheck, and certainly have NOT had to join 10,000 other people in line at a food bank while they wait for an unemployment check to arrive.

These are also people that did not have to stand in line on Tuesday to vote in Wisconsin because the absentee ballots they requested in plenty of time never arrived, and Wisconsin Republicans sued, not just once, but 6 times in two different court systems to make sure they had to stand in those lines.  This is one of THOSE guys behind the lawsuits, Robin Vos, Wisconsin Republican Speaker of the House who blocked moving the election to June to protect the safety of voters:

Robin Vos

But that is a different story, although it is directly linked in the sense that it represents more people that simply do not have to face the same challenges as the rest of us, so let’s get back to the airline “insiders”.  First, it is important to remind you that the shares of stock I am referencing are not the same as what you or I may find ourselves holding because of 401(k) investments, or even shares that some outsider chose to purchase at one time or another.  No, the vast majority of the shares were not “purchased” by the individuals at all.  They were granted by the companies they work for, on top of their 6, 7 and 8 figure salaries and bonuses.  They were purchased by the companies themselves, using cash the company had accrued in the business, much of it from the recent corporate tax cut, and all of it from retained earnings (profit) of their operations, and it is this same cash (or lack of) that has left them needing aid now to get through the economic impact of Covid-19.

In those 19 days since I published the first article on this subject, airline stock has increased in value across the board, as this legislation has served to stabilize “the market”.  Now, I do not know if any of these loans have actually been funded yet, and few people do since there is pretty much no oversight anyway, and Donald Trump has fired the Inspector General who should have been responsible for it this past Friday, but that’s not how markets work anyway.  Just knowing these loans are available has started the recovery.

Airline Stock (4-10-20)

Now, the people we need to look at more closely are those “insiders” I mentioned…the ones who have not missed a paycheck, have not been laid off, and the ones who own a whole lot of stock they never even had to buy themselves.  Here is the combined totals of all “insiders” and how they have benefited since the public first became aware of the Federal government preparing to bail out the airline industry:

Airline Gains (4-10-20)

And lastly, here is how the largest individual “insider” shareholders have been impacted since this legislation was proposed and the negotiations were made public:

Airline Largest Shareholders (4-10-20)

I just want to state one more time that I am not suggesting we should not be doing something to preserve the airline industry, the jobs that it creates for 750,000 direct employees (many of whom face the threat of infection every day they report to work), the hundreds of thousands of secondary jobs the airline industry creates and the essential function the airline industry provides literally to all of us, either directly or indirectly.

What I AM suggesting is that before you post that next meme or bitch to your family about how that “other person” is getting $600 and that’s more than they make when they are working, just stop and think about where the real injustice is at in our country, and more importantly, think about specifically who is perpetuating it when it comes time to vote this November.

Think about how 4 airline executives have increased their combined wealth by $520,571 a day for the past 19 days while you are trying to figure out how to file for unemployment, tapping into your personal savings to stay afloat, waiting in line at a food pantry, waiting in line to vote in the rain in Wisconsin, and how you as a small business owner are trying to navigate an overwhelmed SBA loan program so you can do something for your employees and save your business.

Each one of those four people has increased their wealth by over $130,000 a day over the past 19 days, and that does not make THEM bad people, but you should still think about them, and especially remember to “thank” the people who made this injustice possible in November…Mitch McConnell, 52 Republican Senators, and Donald J. Trump.

How have YOU done over the past 19 days?

Don’t get me started on how those are the same people that are just itching to tell you to go back to work…it’s NOT because they are worried about YOUR income!

 

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