Who Really Gets Paid by Congress?
By: Michael Tauberg
Tags: Politics, News, Government, Finance, Business

Who Really Gets Paid by Congress?

4 Reasons the Coronavirus Stimulus is Corrupt and Inadequate

Written with my wife and muse: Laurie Tauberg

Photo by Louis Velazquez on Unsplash

The gears of our economy have ground to a halt. Market indices are gyrating like it’s the second coming. The canals of Venice are clear after hundreds of years, and rent is due on April 1. Now, on March 26, in the midst of an unprecedented global catastrophe, the United States government has agreed to send us each $1200 if we make a certain income. What a fucking joke.

There are so many things wrong with this depressing stimulus bill. How should we all hate the Coronavirus Aid, Relief, and Economic Security (C.A.R.E.S) Act? Let us count the ways.

1 — A Paltry Amount for People

The failure of federal agencies to prepare for and contain the coronavirus is sad enough. This bill and it’s manifold failures are worse. For one, why do we have to tie essential relief for individuals to a massive bailout for corporations? If we do the math and see where this money is going, we should ask ourselves, who does our government really serve?

According to the tax policy center, most Americans will qualify for a partial stimulus payment. Congress has set aside $250 billion for these rebates, up to $1200 per individual and $2400 per family. In addition, unemployment benefits have been expanded to an additional $600 for 4 months. This boost to unemployment insurance is expected to cost another $250 billion dollars.

So, let’s do some simple addition. The CARES stimulus package is expected to cost 2 trillion dollars and 500 billion is going to private citizens. Where is the other 1.5 trillion headed?

2 — The Boeing Bailout

Since the stimulus bill is 880 pages long, I haven’t had time to figure out exactly where all the hundreds of billions in corporate assistance are allocated. Still, I have a few guesses. Here’s a chart showing the stock price of the Boeing Company. It starts on March 23, when the stimulus was first being planned, and goes until the bill’s passage today. In less than a week the stock rose 80%, and its market cap went from 56 billion to 101 billion dollars. Not bad for a company who’s planes have a nasty habit of falling out of the sky.

That means that investors expect Boeing alone to benefit from this stimulus to the tune of 45 billion. That’s a fifth of what all Americans are getting in direct payments (although I’m sure some individual senators made a bit on well-timed trades).

Of course Boeing isn’t the only beneficiary of the government’s largesse. In order to save the jobs of airline workers, the government is providing loans and guarantees worth up to 32 billion¹ for air carrier companies. It’s also suspending the collection of most aviation taxes². This stealth bailout wouldn’t be so galling if airlines hadn’t wasted years of record profits on corporate buybacks that enriched their investors and executives. Why is the American citizen expected to save for a rainy day while the American corporation is allowed to spend every penny and then go hand outstretched to Uncle Sam?

Money allocated to the rescue of failing companies is the single biggest part of this bill. In total the department of the Treasury has been granted a pool of 500 billion dollars to spend on loans and grants to eligible business. I expect those with the best lobbyists will benefit the most.

The “Small” Business Bailout

Besides airlines and other industries, another $350 billion is set aside for “small business loans”. Normally, this would be limited to so-called “small business concerns”³ — ie. businesses that are independently owned and operated. However, the bill adds language which allows the administration to define the business “size standard” for any industry⁴. In addition, the bill is full of modifiers like this one:

“any business concern that employs not more than 500 employees per physical location …. shall be eligible to receive a covered loan”⁴.

With all of these loopholes it’s clear that almost any business is eligible for government support. It’s amazing how quickly our government is willing to provide cheap loans to corporations of all sizes, while our nation’s students are stuck with crummy high-interest loans that can’t even be discharged in bankruptcy.

3 — Bad Oversight of Corporate Spending

This brings us to the next problem with the stimulus bill, issues with oversight. Thanks to the work of Democrats like Bernie Sanders, the final version of the CARES Act is slightly less like a corporate welfare fund than its original draft. Now, Section 4020 of the bill establishes a congressional oversight commission to review how these funds are to be spent. Still, the vague language in the bill itself doesn’t exactly inspire confidence.

Executive Bonuses Still Possible

The most infuriating part of the 2008 bailout was the way that supposedly poor banks used government money for executive bonuses. For instance The Goldman Sachs bonus pool was $17 billion in 2009, a company record.

This time, Congress did include language to limit the pay of bailed out officials. But if you read the bill carefully, you’ll see that it’s not much of a limit. Corporate executives at airlines, cruise ship companies, and hotels still get to pay themselves most of what they made in the good years. The limit on executive compensation looks like 3 million dollars, but is actually 3 million plus half of what executives made during the boom years(many more million).⁵ If our representatives can’t even limit corporate pay in bankrupt companies, then I don’t have much hope that they can allocate the rest of the funds fairly.

Toothless Jobs Guarantees

The main goal of this bill is ostensibly to protect American jobs. Sending checks directly to corporations might save some positions, but not nearly as many as it should. Reading the language of the bill carefully, it’s clear that companies that receive bailout cash can still fire many employees. Specifically, the bill states:

“the agreement provides that, until September 30, 2020, the eligible business shall maintain its employment levels as of March 24, 2020, to the extent practicable, and in any case shall not reduce its employment levels by more than 10 percent from the levels on such date”

Basically, bailed out companies are allowed to lay off 10% of their employees if they deem that maintaining full employment is not “practicable.” After 6 months, even this 10% cap is lifted. If the companies we bail out aren’t going to secure their workforce, then I don’t understand why we don’t send more of this money to the individuals with an uncertain employment future ahead of them.

4 — More Bank Bailouts

If you thought Wall Street couldn’t get in on the action with this bailout, you were wrong. The CARES Act actually modifies and amends the Dodd-Frank Act to be even more bank friendly. Specifically, it modifies section 1105 of Dodd-Frank to include this:

“a guarantee of deposits held by insured depository institutions in noninterest-bearing transaction accounts may be treated as a debt guarantee program.”

What this means is that we’re back to 2008, where the FDIC is back to insuring checking accounts and more importantly, inter-bank loans. This measure will undoubtedly reduce panic in the financial markets, but it highlights the same corporate favoritism shown in the rest of the bill. Why is there no similar guarantee for forms of consumer debt. Why are government officials so willing to prop up the financial system instead propping up the people that elected them?

Besides the FDIC change, a raft of other bank-friendly regulation is hidden in this bill, and this site has a good breakdown of it. In 2008 Rahm Emmanuel famously said that you should never let a crisis go to waste. It seems like the financial sector was the only one who heeded that lesson.

Final Thoughts

The coronavirus represents an economic threat unlike any we have seen before. It has shut down businesses, kept consumers locked in their homes, and wrought substantial damage to the entire economy. To combat this crisis, we need bold action and new ideas. While the scale of the Coronavirus Aid, Relief, and Economic Security Act is welcome, its contents are not. Instead of helping people survive, Congress has chosen to help companies. Instead of the wealthy supporting taxpayers, taxpayers are supporting the wealthy. Only time will tell how much these decisions will end up truly costing us — and it will certainly be more than the trillions allocated in the bill.

Notes

1 — Section 4003 subsection ‘b’ of the CARES act

2 — SEC. 4007. of CARES act

3–15 U.S. Code § 632.Definitions

4 — SEC. 1102 D of the CARES act

5 — SEC. 4116. subsection a