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I don't think this is the right approach. Look at the airlines, for example. They own/lease super expensive machines that need to be in the air filled with pa

I don't think this is the right approach. Look at the airlines, for example. They own/lease super expensive machines that need to be in the air filled with paying customers to make the economics of being an airline viable. Travel is now essentially banned, so they can't do that. It is likely that when the pandemic is under control, people will again want to ride airplanes to far-away destinations. So it seems reasonable to me to provide some sort of financial help to the airlines alive during this once-in-a-century event. They didn't really mismanage their business by buying airliners and not planning for a global pandemic -- there was simply no way to run the business profitably with an allowance for "someday we will be unable to fly for 6 months in a row". It seems to me that if society wants air travel, which we do, we have to step up and at least provide a loan to cover for this essentially-unforeseeable event. There isn't a passenger airline in existence that planned for this event and is making a profit right now, it's simply not an environment that a passenger airline can be profitable in. The government paying for Coronavirus also provides a financial incentive to not fuck it up so badly next time. We ignored the warning signs and decided to do nothing -- now it's costing us. Next time, we'll know that mismanaging the early days of a pandemic is going to cost trillions of dollars, so we'll probably do a better job. (Or rather, vote for people that will do a better job.) (Here's how I think we should have handled the early days of Coronavirus. Ban travel and buy back the tickets/reservations for all travellers. People were still taking vacations even when Coronavirus was widespread. I'm guessing they did that because they sunk $2000 into non-refundable reservations, and didn't want to be the ones to subsidize the airlines. So they took their trip, got Coronavirus, infected 3 other people, and now tens of thousands of people are dead.)

toomuchtodo 7y ago
> The government paying for Coronavirus also provides a financial incentive to not fuck it up so badly next time. It absolutely doesn't. Time and time again, corporations have proven their shareholders (management as well) will simply strip as much value as they can, and leave us (taxpayers via government, citizens with devalued currency via the Fed and their monetary policy) holding the bag with any losses or externalities to clean up. For example, the Tax Reform Act was sold as incentivizing "jobs and investment"; all it incentivized was share buybacks [1]. Shareholders and management have proven themselves unworthy of trust, or more accurately, public and fiscal policy benefiting them that operates on the honor system. "Fool me once!" [1] https://money.cnn.com/2018/07/10/investing/stock-buybacks-record-tax-cuts/index.html https://money.cnn.com/2018/07/10/investing/stock-buybacks-re...
- _curious_ 7y ago
  "The government paying for Coronavirus also provides a financial incentive to not fuck it up so badly next time." How so?
  - ryankemper 7y ago
    I think you should have replied to the parent comment. The person you replied to was quoting that so that they could argue against it.
  - nybble41 7y ago
    You're asking the wrong poster (that sentence was a quote). But I believe jrockway was referring to the government's response to COVID-19, not to the companies that would be bailed out as toomuchtodo apparently assumed. The problem with that reasoning is that governments don't suffer the consequences of mismanagement the same way companies and private citizens do. Sure, the elected officials may end up voted out, but the same bureaucrats will still be running things, and the basic institutions and systems that led to the current response aren't likely to change.
- philwelch 7y ago
  > For example, the Tax Reform Act was sold as incentivizing "jobs and investment"; all it incentivized was share buybacks So what? If I own a successful company, eventually I'm going to reach a point of diminishing returns. At that point, it no longer makes sense to reinvest my company's profits back into the same company. Eventually, I'm going to use that money to start a new business. Doing that will make more money and create more jobs than trying to scale my old company past the point of diminishing returns. With a public corporation it's simply a case of management making that judgment on behalf of the collective shareholders.
jgacook 7y ago
What on earth incentivizes them to not repeat this pattern of behaviour if they can rely on a no-strings-attached cash infusion? Middle class Americans are expected to have enough cash reserves to survive 2-3 months in case of an emergency. Why is this expectation not in effect for an airline that makes vastly more profit per capita than the average household? Airlines spent well over 96% of their free cash flow on stock buybacks, enriching their boards of directors, executives, and shareholders. Do you think it's fair that they can make those decisions and still be entitled to favourable loan agreements when their mismanagement comes back to bite them? Why do we not let the airlines have an asset selloff of their "super expensive machines" in an attempt to bridge the coronavirus gap before giving them public funding? Could they not declare bankruptcy and restructure themselves to survive until shelter in place is over and business returns to normal? Why does the government bailout not have the cash infusions come in the form of an equity buyout, thus bringing actual consequences to the mismanaged airlines and bringing a more stable guarantee of investment return to the taxpayers who have funded this bailout? Shouldn't having access to socialized coffers come with the caveat that your company must become, in part, socialized? The system only works if companies feel the pain of their mismanagement. Any whisper of bailing out the airlines without considering the above is disgusting and un-American. You don't get to privatize profits and socialize losses. History has shown that companies do not learn lessons unless they are allowed to fail.
- salawat 7y ago
  >Do you think it's fair that they can make those decisions and still be entitled to favourable loan agreements when their mismanagement comes back to bite them? Ex-shareholders technically. Remember, stock buybacks only generate value when you exit the stock. Technically, if you've been holding, you're up shit creek. >Why do we not let the airlines have an asset selloff of their "super expensive machines" in an attempt to bridge the coronavirus gap before giving them public funding? Could they not declare bankruptcy and restructure themselves to survive until shelter in place is over and business returns to normal? Who the hell would buy them at this point? Wealth is so consolidated right now it'd be right back in the hands of the same people who were incentivizing the behavior in the first place. The rest of your post is 100% spot on though in my estimation though.
- 7y ago
codyswann 7y ago
> They didn't really mismanage their business Didn't the airline industry spend something like $45b on buybacks? And are now looking for $50b in a bailout? That seems like mismanagement to me.
pmoriarty 7y ago
"it seems reasonable to me to provide some sort of financial help to the airlines alive during this once-in-a-century event" For how long? It's anyone's guess how long the pandemic will last. If we're lucky, there could be a vaccine ready in 18 months, but maybe we won't be so lucky. And how much money should the airlines be given, as opposed to, say giving money to people who can't afford to pay their rent or feed themselves or their families?
- zaroth 7y ago
  What do you mean “as opposed to”? The money is made up, created from thin air. The interest rate is negative. The only side effect is inflation. And commodity prices are cratering. I’m only half joking.
jkhdigital 7y ago
> They own/lease super expensive machines that need to be in the air filled with paying customers to make the economics of being an airline viable. Do you operate an airline? Do you have some crystal ball that reveals the true economic costs of capitalizing and operating an airline? Capitalism is premised on the notion that the aggregation of economic decisions made by individuals, with full freedom of choice, leads to the most productive and equitable allocation of capital for the economy as a whole. It's also premised on "skin in the game"--those who risk their capital in a venture both reap the rewards and bear the risk of losing that capital if things go poorly. Here's the bottom line: no matter which way you slice it, capital is being destroyed when airlines can't operate for six months. Who should pay for that? If your answer is anyone other than the investors who put their capital at risk in financing the airline, then we have stepped outside of capitalism already and we might as well just nationalize the airlines to accomplish whatever your goal is.

toomuchtodo 7y ago

> The government paying for Coronavirus also provides a financial incentive to not fuck it up so badly next time. It absolutely doesn't. Time and time again, corporations have proven their shareholders (management as well) will simply strip as much value as they can, and leave us (taxpayers via government, citizens with devalued currency via the Fed and their monetary policy) holding the bag with any losses or externalities to clean up. For example, the Tax Reform Act was sold as incentivizing "jobs and investment"; all it incentivized was share buybacks [1]. Shareholders and management have proven themselves unworthy of trust, or more accurately, public and fiscal policy benefiting them that operates on the honor system. "Fool me once!" [1] https://money.cnn.com/2018/07/10/investing/stock-buybacks-record-tax-cuts/index.html https://money.cnn.com/2018/07/10/investing/stock-buybacks-re...

_curious_ 7y ago
"The government paying for Coronavirus also provides a financial incentive to not fuck it up so badly next time." How so?
- ryankemper 7y ago
  I think you should have replied to the parent comment. The person you replied to was quoting that so that they could argue against it.
- nybble41 7y ago
  You're asking the wrong poster (that sentence was a quote). But I believe jrockway was referring to the government's response to COVID-19, not to the companies that would be bailed out as toomuchtodo apparently assumed. The problem with that reasoning is that governments don't suffer the consequences of mismanagement the same way companies and private citizens do. Sure, the elected officials may end up voted out, but the same bureaucrats will still be running things, and the basic institutions and systems that led to the current response aren't likely to change.
philwelch 7y ago
> For example, the Tax Reform Act was sold as incentivizing "jobs and investment"; all it incentivized was share buybacks So what? If I own a successful company, eventually I'm going to reach a point of diminishing returns. At that point, it no longer makes sense to reinvest my company's profits back into the same company. Eventually, I'm going to use that money to start a new business. Doing that will make more money and create more jobs than trying to scale my old company past the point of diminishing returns. With a public corporation it's simply a case of management making that judgment on behalf of the collective shareholders.

jgacook 7y ago

What on earth incentivizes them to not repeat this pattern of behaviour if they can rely on a no-strings-attached cash infusion? Middle class Americans are expected to have enough cash reserves to survive 2-3 months in case of an emergency. Why is this expectation not in effect for an airline that makes vastly more profit per capita than the average household? Airlines spent well over 96% of their free cash flow on stock buybacks, enriching their boards of directors, executives, and shareholders. Do you think it's fair that they can make those decisions and still be entitled to favourable loan agreements when their mismanagement comes back to bite them? Why do we not let the airlines have an asset selloff of their "super expensive machines" in an attempt to bridge the coronavirus gap before giving them public funding? Could they not declare bankruptcy and restructure themselves to survive until shelter in place is over and business returns to normal? Why does the government bailout not have the cash infusions come in the form of an equity buyout, thus bringing actual consequences to the mismanaged airlines and bringing a more stable guarantee of investment return to the taxpayers who have funded this bailout? Shouldn't having access to socialized coffers come with the caveat that your company must become, in part, socialized? The system only works if companies feel the pain of their mismanagement. Any whisper of bailing out the airlines without considering the above is disgusting and un-American. You don't get to privatize profits and socialize losses. History has shown that companies do not learn lessons unless they are allowed to fail.

salawat 7y ago
>Do you think it's fair that they can make those decisions and still be entitled to favourable loan agreements when their mismanagement comes back to bite them? Ex-shareholders technically. Remember, stock buybacks only generate value when you exit the stock. Technically, if you've been holding, you're up shit creek. >Why do we not let the airlines have an asset selloff of their "super expensive machines" in an attempt to bridge the coronavirus gap before giving them public funding? Could they not declare bankruptcy and restructure themselves to survive until shelter in place is over and business returns to normal? Who the hell would buy them at this point? Wealth is so consolidated right now it'd be right back in the hands of the same people who were incentivizing the behavior in the first place. The rest of your post is 100% spot on though in my estimation though.
7y ago

codyswann 7y ago

> They didn't really mismanage their business Didn't the airline industry spend something like $45b on buybacks? And are now looking for $50b in a bailout? That seems like mismanagement to me.

pmoriarty 7y ago

"it seems reasonable to me to provide some sort of financial help to the airlines alive during this once-in-a-century event" For how long? It's anyone's guess how long the pandemic will last. If we're lucky, there could be a vaccine ready in 18 months, but maybe we won't be so lucky. And how much money should the airlines be given, as opposed to, say giving money to people who can't afford to pay their rent or feed themselves or their families?

zaroth 7y ago
What do you mean “as opposed to”? The money is made up, created from thin air. The interest rate is negative. The only side effect is inflation. And commodity prices are cratering. I’m only half joking.

jkhdigital 7y ago

> They own/lease super expensive machines that need to be in the air filled with paying customers to make the economics of being an airline viable. Do you operate an airline? Do you have some crystal ball that reveals the true economic costs of capitalizing and operating an airline? Capitalism is premised on the notion that the aggregation of economic decisions made by individuals, with full freedom of choice, leads to the most productive and equitable allocation of capital for the economy as a whole. It's also premised on "skin in the game"--those who risk their capital in a venture both reap the rewards and bear the risk of losing that capital if things go poorly. Here's the bottom line: no matter which way you slice it, capital is being destroyed when airlines can't operate for six months. Who should pay for that? If your answer is anyone other than the investors who put their capital at risk in financing the airline, then we have stepped outside of capitalism already and we might as well just nationalize the airlines to accomplish whatever your goal is.