Legendary economist Milton Friedman warned that the greatest threat to the free-enterprise system is free enterprise. Now that the Wuhan Coronavirus pandemic has crippled the global economy, a lot of industry titans are extending their hands like a character from Oliver Twist, asking for a taxpayer-funded bailout to endure coughs, sniffles, and pneumonia. Aerospace juggernauts, banking titans, and restaurant behemoths – the private sector is in pursuit of government funding to survive the COVID-19 crisis. A decade after the U.S. government decided to privatize gains and socialize losses, we might be asking: should a virus outbreak be enough to help some of the world’s largest companies?
Brother, Can You Spare a Dime?
It is only a matter of time before Republicans and Democrats in Washington approve a colossal rescue package for the private sector. Policymakers are seemingly weighing what provisions to include – buyback restrictions and a cap on executive compensation – and which businesses should get the money. The list of companies pleading for your tax dollars is growing by the day.
The airline industry has been decimated by the pandemic, shedding tens of billions of dollars in about a month. Because of this, some of the nation’s biggest publicly traded airlines are asking for a bailout. In exchange for relief funds, they are promising to be good little boys and girls by eliminating dividends, stopping buybacks, and placing limits on CEO pay during the life of loans or loan guarantees. How much do they want? According to the letter signed by the CEOs from American Airlines, Delta Air Lines, JetBlue, Southwest, United Airlines, and others, the proposed figure is at least $29 billion.
Boeing, which has faced numerous internal struggles over the years, is begging for a $60 billion handout. The aerospace manufacturing corporation revealed that it is having trouble meeting its liquidity needs and cannot raise enough credit under current market conditions. As a result, it needs substantial government support. The announcement led to former South Carolina Governor Nikki Haley resigning from the board over “philosophical principle” because she does not believe the company should seek monetary support from the government.
The Federal Reserve has been saving the financial sector from ruin since September. But it would not be surprising if Goldman Sachs and JPMorgan Chase went to Washington and asked for a few bucks.
The National Restaurant Association, an American trade group, is asking for $455 billion in aid. It warned the industry could eliminate more than 15 million jobs and take a sales hit of $225 billion due to the Coronavirus outbreak.
Recently, hotel and travel industry executives met with President Donald Trump to talk about a recommended $250 billion injection. This would include $150 billion in direct assistance and $100 billion for related travel businesses.
Even the booming private jet industry is searching for a Coronavirus bailout. The National Business Aviation Association, an organization that represents private and corporate jet firms, sent a letter to House and Senate leaders, requesting access to “medium to long-term liquidity assistance and relief from air transportation excise taxes” amid “increasing financial uncertainty.” However, reports suggest that business is doing well as wealthy individuals avoid commercial flights. Should a sector of the economy that largely serves the most affluent members of society get a taxpayer-funded lifeline?
With these industries combing their hair and putting on their Sunday shoes, you are going to see even more companies make the case that they, too, should be extended money to weather the storm clouds.
The federal government is on the verge of bailing out the American people to the tune of at least $1 trillion. The White House’s top economist Larry Kudlow is considering upward of $2 trillion. It is unknown how much Washington will spend to save the private sector, but it could be in the same ballpark. Whatever it is, America cannot afford it with a bloated budget and the ocean of red ink that has swallowed the nation’s capital.
If the federal government could miraculously afford the latest spending binge, there should be a dispute over whether the private sector should be given anything at all. On the one hand, proponents will present the argument that tens of millions of jobs are at stake, and the crisis was not the private sector’s fault. On the other, opponents will argue that private businesses should sink or swim on their own without state interference. It can be difficult, even for free marketeers, to decide which is the justified position.
There is already precedent going back to the Great Recession when automakers, the big banks, and the green energy industry were given checks to do whatever they want. Establishmentarians will eternally defend the bailouts, positing the necessity over giving multi-national corporations and well-connected businesses money. Back then, there was some debate. Today, the consensus is to toss everyone a bone.
Without any resistance from either side of the political spectrum, we are bastardizing the free-enterprise system, nannying the public, and introducing a new economic model of privatizing gains and socializing losses. Is this the spirit of the United States? You could pontificate that the fabric of America has already been unraveling, one thread at a time; the land of the free and home of the brave diminishing with each new generation, thanks to big government.
In this environment, fair is foul and foul is fair. A month ago, who would have thought that anyone would be panic-buying toilet paper? And yet, here we are.
In Government We Trust
No matter what happens, it is a certainty that life in America has been reshaped forever. Everything that has occurred in recent weeks will dramatically transform the fabric of not only the United States but also the rest of the world. This is not a good development for civil libertarians, free-market capitalism, or the sound money crowd. The Coronavirus could be the opportunity to nationalize industry, impose a universal basic income, and determine how passive millions of citizens are to government decrees. Coronapocalypse or coronahype? Either way, the paternalists will exploit the coronacrisis and prevent anybody from asking any reasonable questions, like, “Is all this spending and inflation justified?”
Read more from Andrew Moran.