Supporting industries is necessary to mitigate the economic impact of the pandemic. But using the coronavirus as an excuse, Boeing and other companies are trying to get taxpayers to foot the bill for their managerial errors. It is not too late to put a limit on corporate subsidies.
Here’s the situation: Mitch McConnell, Chuck Schumer, and the Trump administration are negotiating a bailout package to address the coronavirus crisis. There’s been a lot of chatter about the need to support workers as the economy goes into a freeze. This is happening around the world. The British government, for instance, is willing to pay 80 percent of worker wages during this downturn for those affected by the crisis.
But in the US, our leaders seem to be falling prey to what can only be called a corporate frenzy of favor-seeking. “Any time there is a crisis and Washington is in the middle of it is an opportunity for guys like me,” said one lobbyist.
Now first, I should say that I don’t know exactly what is going to be in the final bill, because the whole process is opaque and being negotiated right now by some untrustworthy political leaders. We will only find out the details at the last minute. So all I have to go off is rumors and reporting. But if we wait until we know the full contours, it will likely be too late to act.
I hope I’m wrong, but the list of what lobbyists are asking for is long, and ugly, and often the requests for money or legislative favors are done to cover up mistakes made before the coronavirus hit.
The Coronavirus Excuse
Take Boeing. The aerospace giant, of course, wants a $60 billion bailout. Financial problems for this corporation predated the crisis, with the mismanagement that led to the 737 Max as well as defense and space products that don’t work (I noted last July that a bailout was coming).
The corporation paid out $65 billion in stock buybacks and dividends over the last ten years, and it was drawing down credit lines before this crisis hit. It is highly politically-connected: the board of Boeing includes Caroline Kennedy, Ronald Reagan’s Chief of Staff Ken Duberstein, three Fortune 100 CEOs, a former US Trade Representative, and two Admirals, one of whom is the board’s only engineer.
Using the excuse of the coronavirus, Boeing is trying to get the taxpayer to foot the bill for its errors, so it can go back to making more of them.
But that’s not all. Defense contractors want their payments sped up, and I’ve heard they want to widen a giant loophole called “other transaction authority” to get around restrictions on profiteering.
Elon Musk and Jeff Bezos want “$5 billion in grants or loans to keep commercial space company employees on the job and launch facilities open.” They also want the IRS to give them cash for R&D tax credits.
CNBC reported that hotels want $150 billion, restaurants want $145 billion, and manufacturers want $1.4 trillion. And the International Council of Shopping Centers wants a guarantee of up to $1 trillion. The beer industry wants $5 billion. The candy industry wants $500 million.
The New York Times reported that “Adidas is seeking support for a long-sought provision allowing people to use pretax money to pay for gym memberships and fitness equipment.” Gyms are, of course, closed.
Meatpackers want special visas so they can undercut wages of their workers, and importers want to stop paying duties they incurred for harming domestic industries for illegally dumping products into the US.
Now, I’m not opposed to supporting industries. This is a crisis, and we do not want a lot of the productive capacity of the United States to fall apart because of a pandemic. But the key to supporting enterprises is to make sure that there are strict conditions, so that power doesn’t consolidate into the hands of monopolists and financiers cherry-picking distressed assets. Otherwise, America will simply be unrecognizable after this pandemic.
CNBC personality Jim Cramer, for instance, is worried that after this pandemic, America will have just three retailers. And he’s right to be worried about that.
Here’s how we can stop it.
There are enough members of Congress to act and prevent what really looks less like a relief package and more a corporate coup. However, the problem is that this group is split into different political parties, and Congressional leadership is taking advantage of that dynamic to jam this through.
What the Democrats Want
Mitch McConnell wants big business to rule, so he’s playing a trick. He is refusing aid to workers. Democrats are negotiating with him to try to get unemployment assistance and social welfare. McConnell knows Dems won’t pay attention to corporate bailouts if he takes the public hostage, and Democrats know that they can hand out favors to Big Business if they just talk about how they got larger checks for workers.
So McConnell will put a bill down in front of Nancy Pelosi, with some good stuff like unemployment insurance, but also the really ugly stuff to hand over America to big business. The corporatists in the Democratic Party will tell her “Pass the corporate coup bill, after all we have to do something right now!” And because she doesn’t have the votes from within her own caucus because of these corporatists, and because she doesn’t particularly care if America is sold off to big business, she will do that.
The only hope is to get together a bipartisan group from the right and the left to oppose this charade. And there’s a precedent.
What Happened in 2008
In 2008, when Congress was on the brink of passing a $700 billion bailout to Wall Street, something astonishing happened. A motley bipartisan group of roughly a hundred members, as well as outside experts, formed what was called the “Skeptic’s Caucus,” and organized enough votes to take down the package.
Congressional leaders then attached some minor tweaks and forced the package through after the stock market crashed. Ultimately, the skeptics failed, and the bailouts ended up shifting power and wealth to an unaccountable elite class.
But for that brief moment, it became clear that opposition to Congressional leadership on corporate subsidies is possible. We will need another Skeptic’s caucus, and quickly. And this time, it can succeed. Because this time, no one is fooled by what is happening. We can see it plainly.
Matt Stoller is the author of Goliath: The Hundred Year War Between Monopoly Power and Democracy and Director of Research at the newly-founded American Economic Liberties Project. This column originally appeared in BIG, Stoller’s newsletter on the politics of monopoly. You can subscribe here.
ProMarket is dedicated to discussing how competition tends to be subverted by special interests. The posts represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty. For more information, please visit ProMarket Blog Policy.