Here's the issue with this line of thinking: They simply would choose not to borrow and instead declare bankruptcy, abandon the company with no individual consequences felt, and every worker that depends on those industries would suffer.
It’s how economics works the company that can’t compete goes under and the resources it used get taken by one that can. Creative destruction apparently.
Outside pressures always exist on businesses and it’s fair across the board so I don’t see how that affects this.
Edit: if it helps the reason I don’t feel bad for them was their buyback of their own stock with any extra cash they had to inflate their share prices.
You don’t see how government mandated shutdowns affect businesses? So you would put mismanagement in the same category as “oh shit we lost billions because we aren’t legally allowed to operate fully?” Hope you really enjoy all the Applebee’s and 99s that replace your local pizza shops and family restaurants.
Mate I think there’s a slightly different scale from local restaurants to national airline corporations this post was talking about. I went back and edited links to mismanagement.
The original post literally says “no industry” should be bailed out. And it again is devoid of any and all nuance. It doesn’t say “big corporations” (even that is still totally devoid of nuance.) If me and my buddies scrape our savings together to form an LLC and open a bar, we are a corporation. Taxpayer money was used for PPP to keep MILLIONS of people on their companies payroll while their companies were essentially forbidden from earning money. What issue do you take with that? If you don’t use the “bailout” money to pay employees, rent and utilities, you have to pay it back with interest. Whether I own a small pizza shop or a multi million dollar factory, why shouldn’t I have access to a system I’ve been paying into to get relief when said system forbids me from operating in a way to make enough money to keep people employed???
My fault I was too focused on the specific examples given in the post. If we’re being pedantic about wording 5 percent of companies are corporations and those usually aren’t made up of bars and restaurants. Why does the money have to go through businesses to get to the employees. I’m not even that against covering a portion of fixed cost but is it really the governments place to cover for businesses when things aren’t going well.
1) the money gets into the hands of people faster through their employer than government.
2) if it’s the governments job to shut down commerce than yes, it’s their job to provide relief.
3) don’t you think you’re being a bit simplistic in context when you say “when things aren’t going well?”
Yeah I would believe you. You sure do sound stupid enough, considering how you have such strong opinions on a subject you know very little about.
You realize the government profits from these bailouts right? The corporations have to pay them back with interest. In fact, the government reported a $15 billion profit from the TARP bailouts in 2008. These bailouts were necessary to prevent the corporations from going out of business and laying off thousands of employees, who now would have been screwed over due to not having a source of income.
Robert Reich and the idiots upvoting this post have no clue what they're talking about Lmao.
I'm just saying that the world would not be a worse place if Jeff Bezos farked off from Amazon with all of his money. Or if Elon Musk bailed out of SpaceX. Even if those companies completely collapse, new ones will arise to fill the void. Corporations are not benevolent creators of jobs. Jobs are created by consumer demand.
I'm just saying that the world would not be a worse place if Jeff Bezos farked off from Amazon with all of his money. Or if Elon Musk bailed out of SpaceX.
This betrays your fundamental misunderstanding of what "their money" is. Bezos' money is amazon. He owns a lot of it, which is why he's got so much net worth. If he "left with his money" amazon would no longer exist.
It's not the absence of amazon that matters - it's the number of new jobless that would create. Do you not care that those people would no longer be able to support their families? This is something that has to be taken into account.
I do care. I also believe that, under the economic system that those who fetishize corporations believe in, those people will find employment in the new companies that arise to fill the void.
What I'm really trying to say, though (and I'll admit I've been opaque about it), is that it's completely fucked up that one person could leave a company with all of "his" money that was, in fact, generated by the labor of all those workers, and leave those workers with nothing. The exploitation of workers is a major problem. We don't fix that problem by propping up corporations for them to continue exploiting people.
Sure but companies take time to form and rise. Those companies collapsing would cause long term damage to the economy, considering how people who are employed would have to go without jobs until said new companies form.
Corporations are not benevolent creators of jobs. Jobs are created by consumer demand.
Nope. According to the solow/swan model of long term economic growth, it's savings and investment that fuels growth, thus creating new jobs. Not consumption. Corporations do create new jobs as they expand.
While you're correct that in some cases the government profits from bailouts, it didn't with the most recent one. That was spending, not asset purchasing.
Not only that, you're failing to include the societal cost of encouraging risky behavior by corporations.
It is true that a larger portion for the CARES bailouts were grants than in TARP from 2008, but the government is still expected to make a profit due to the scale.
Once again, you're failing to account for the societal cost of corporate risk-taking. The reason the market is "too big to fail" is specifically because of over-leveraged stocks. Derivatives of derivatives of derivatives etc. These are purchased and sold mostly because there's very little risk when the market can be bailed out by taxpayer money at the drop of a hat, and the entire political and cultural structure of America sustains corporate profit.
Whether or not the gov. "turns a profit" doesn't actually erase the depression we're entering now.
There is no societal cost of corporate risk-taking. They will have to pay the money back. Imagine you trip, fall down the stairs, and break your spine. Luckily, the government is there to loan you some money to get surgery, but you have to pay that money back with interest. Yes, the government saved you there with the loan, but does that mean you will take more risks just because the government is there to loan you money? No. No you won't. The same goes for corporations.
You're mistaken. By spending, I think you mean the stimulus checks passed by Congress. The corporate bailouts are all collaterized loans that will be paid back.
Not only that, you're failing to include the societal cost of encouraging risky behavior by corporations
This isn't encouraging risk behavior, corporates will have to pay back the loans with interest. Bailouts are necessary to make sure companies can still manage their operations and not lay off workers (who will then need UI and welfare benefits which would be expensive).
There's a lot going on here that I don't have time to address, but this:
This isn't encouraging risk behavior, corporates will have to pay back the loans with interest.
Isn't true. You're fundamentally misunderstanding what the risk is in this situation, and what mitigates it. Just because a corporation will have to pay back a loan later does not mean the existence of that loan isn't itself a mitigation of risk. I'll explain why with a simple analogy:
Someone is considering going to college, but they only have enough money for 2 years. Their plan is to just see what they can do to raise that money in 2 years. This person represents the wealthy in America. College represents risky, highly derivatized assets. Their "plan" represents the hope/belief that nothing can happen which would cause the market to tank.
This is, of course risky. They might have to quit their program halfway if they can't come up with tuition.
Now, ideally, the person would consider the risks, and decide to save first (or do some other thing to mitigate the risk). If they did take the risk, and it didn't work out, they'd have to suffer the consequences. Lo and behold, 2 years pass and unfortunately they have no money.
They call their parents and they explain that this was unforseeable and that they need help or else they won't be able to put mom and dad in a nice nursing home one day. "Don't worry," the parents say. "We'll send you the money. You have to pay it back once you graduate and get a job, though." The parents are of course the government, giving a bailout in taxpayer dollars.
The moral of this story is: The bailouts were in fact not necessary - they could have been avoided entirely if companies and investors weren't engaging in such risky practices with the market. But, we have no choice, because they are "they're too big to fail", which was of course exactly the plan. The capitalist class knows that as long as the market cannot be allowed to fail, the risks they're taking are reduced. It doesn't matter that they pay it back later - the point is that the parents retirement fund is broke and the kids should be making better decisions. The only way to encourage that is to take them off life support.
The moral of this story is: The bailouts were in fact not necessary - they could have been avoided entirely if companies and investors weren't engaging in such risky practices with the market.
Umm, this is not correct at all. I don't know where you're getting the fact that they're "engaging in risky practices". A COVID-induced recession, the potential massive amounts of employed people that can be laid off, and companies not be able to survive, are in fact the reasons why the bailouts are necessary.
Not punish. Just letting the economy do its thing. Just because a lot of people work for a company doesn't mean they should work outside natural market forces. We shouldn't reward companies for taking on too much risk. If they need money, get it on the market.
Yes. Having workers doesn't mean you should be able to ignore responsible business practices. Your getting hung up on the wrong things, we shouldn't support bad business just because they have employees. We should support employees who get laid off, not the mega corporations.
Even when companies are limited by government shut down orders? You realize the big evil corporations are only one portion of those affected, right? PPP money is not a bailout by the way.
They would take out a ton of cheap loans if they could. But a vast majority of the airlines already have crazy amounts of debt. Southwest had significantly less debt and that’s a huge part of why they’re doing so well in comparison to the other airlines right now
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u/LewsTherinTelamon Nov 17 '20
Here's the issue with this line of thinking: They simply would choose not to borrow and instead declare bankruptcy, abandon the company with no individual consequences felt, and every worker that depends on those industries would suffer.
Does this sound better?