Welcome To The COVID Economy

Sure, there's a Trump tweet for occasion; but there's also a George Carlin video for every occasion as well. You may prefer how Carlin explains what we're going through as a society now but economist James Galbraith is slightly less pessimistic. In fact, he wrote a piece for The Nation this week about how to confront the side-effects of the pandemic, namely the economic one. He looks at it square in the eyes and wants you to accept it: "a house of cards has fallen. An entire world of illusions, self-deceptions, and sophistries has died. We’ve come to the end of a very long string. The string has been unspooling since the triumphs of Milton Friedman and Friedrich von Hayek, conventionally thought of as Margaret Thatcher and Ronald Reagan, but rooted equally in Jimmy Carter and Bill Clinton, in Tony Blair and Gordon Brown, and in the Bushes and Obama and many lesser figures. A binational, bipartisan coalition of catastrophe in the Anglo-Saxon realm of ideas. Donald Trump and Boris Johnson are consequences, not causes, of this mental failure. The delusion is economics as we’ve known it. Here, two concepts have ruled: self-organization and the veil of money. The first argued for markets, for all of society to be mediated by the forces of supply and demand. Its supposed virtues were competition, flexibility, incentives, efficiency; the reality is a fragile web, woven in strands of glass. The second submerged the financial system-- the banks, traders, speculators-- rendering those people and institutions as mere messengers, unimportant and invisible."

He wrote that "our leaders now plan to send out cash, as 'stimulus'-- as though a market response will organize itself. It is another delusion. In Europe "border controls are back" and America "is breaking apart." I agree with him that "federal officials, with few exceptions, are predatory, indifferent, or merely stupid [and that] congressional leaders appear stymied. The few steady hands are those of some governors-- in both parties-- many mayors, county judges, and other local officers." I don't know what he means by governors of both parties. The only governor who appears to be doing a genuinely good job at confronting the pandemic-- not a cosmetic job-- is DeWine, an Ohio Republican.

For the population, it is a test of character. Ordinary Americans are for the most part community-minded, prepared to follow instructions and do right, if others will do likewise. Around me in Austin, people are curtailing activities while going about their day jobs in the face of increasing risk. Pools and playgrounds and libraries are closed—we’re told, for several weeks. Everyone knows it could be months and months.

As everyone also knows, there has been far too little testing. There is no reserve of hospital beds or equipment. Global supply chains are broken, and medicines of many types will run short. The only possible advantage to being in America right now is that it is a large country; many people live in more space and can self-isolate more easily, for a time. This is not a consolation for the poor, nor for New Yorkers, nor for those reliant on assistance that they may not be able to get.





It is hard to look past the imminent swamping of the health system, but there are deeper disasters afoot. In California, nearly 6 million elderly have been told to stay home. Many of them live alone or in pairs. Who will feed them? To this, the governor replied, “Good question.” The reality is, we’ve done a good job in this country of keeping many frail and elderly people alive, a very poor job of keeping them healthy, and we have no system for keeping them fed. We may not even know where they are.

We are told there is plenty of food in the country. Can it get to the stores? Yes, for now; but for how long? How long will people be there to stock and sell and run the checkout counters and maintain security? Distribution and security are the weak links in the food chain. The market has given us efficiency and a high living standard. It has by the very same token not given us resilience, spare capacity, coordination, or leadership. It has, instead, given us fragility. A web of glass. Panic is both the rational response and the enemy. If panic takes control, it will destroy whatever is left.

The American economy must convert, in full and at once, to fight the pandemic. A public corporation-- the Health Finance Corporation, based on the Reconstruction Finance Corporation of the Depression and World War II, with power to borrow and allocate and meet problems as they arise-- is needed now. The National Guard and the Army and all their resources must be deployed. And every civilian resource, including all available human beings, must be enlisted.

The immediate medical need is supplies, beds, personnel. Hospitals can be built in days, we have learned. Space can be requisitioned; hotels and dormitories are empty. The military is said to know how to deal with mass casualty events. The Defense Production Act gives authority to command companies to make masks, oxygen tanks, respirators. Unlimited jobs are available for people to clean and perform other basic functions. It’s risky work, and it must be decently paid. Guarantee the jobs, and people will do them. China managed that much, and many people volunteered.

The next need is to stabilize priority civilian supply: food, drugs, cleaners, paper goods. The existing system may hold up for a while. The essential is to lock it in place, supporting the people doing their jobs so that they can continue: drivers, stockers, checkout clerks, cooks and kitchen help, and scrubbers. If the necessary goods keep coming in, people will stay calm and get along without the rest. As in Korea, ride-share and taxi drivers can be trained to disinfect and mobilized to drop off meals and medicines. Suddenly, all these workers are essential and must now be treated that way.

All the information services should now be drafted and basic customer bills should suspended for the duration: cable, cellular, landlines, Internet. Let the federal government compensate the companies for basic costs. Having secure communications and entertainment will help keep people at home. The boost in disposable incomes will help in exact inverse proportion to wealth; those losing work income will benefit most.

Among the most necessary big corporations right now are those who run mass distribution networks: Amazon, Walmart, FedEx, UPS, and the drugstores and major fast-food chains. They should be run as public utilities for the duration. That means giving delivery at cost on essential goods and stop-orders on frills. Top executives should contribute their time. The workers should get raises and medical care and protective equipment and unions. In return for staying on the job in the emergency, those workers too should emerge in an entirely different position after this ends.

Many large, medium, and small employers are down for the count and may be bankrupt soon: airlines, hotel chains, shopping malls, convention centers-- more than anyone can list. The equity will be gone; there must be financing to maintain essential operations and to hold the physical and engineering assets in place, and a debt moratorium to stave off the creditors and the vultures. Needless to say, evictions and foreclosures and utility stoppages must be stopped immediately; if necessary, it is better to ration the supplies. As businesses go down, so will the bankers. After the wave passes, we’ll see what can be rebuilt.

Through it all, the people must be reassured. Those at home must be cared for. And those who remain healthy must be given useful work. Solidarity, organization, determination: These are the words for us now.

Changing times... very changing times requires agile, competent leadership which is in short supply in our ruling class. Take the idea of bailouts. The airlines near our money to stay in business? OK, our tax dollars should go towards buying their stock. As Aaron Gordon wrote at Vice yesterday, "U.S. airlines have spent the last decade shoveling billions in profits to stockholders. Now they want your tax dollars with no strings attached. Fuck that."

The last decade has been very good to U.S. airlines. Industry consolidation, stuffing more people into smaller spaces on planes, and stacking fees upon fees have resulted in unprecedented prosperity for the country’s Big Four (American, Delta, United, and Southwest). From 2012 to 2016, these four airlines were the most profitable in the world, walking away with a combined $42.3 billion, according to an analysis by L.E.K. Consulting. In the two subsequent years, 2017 and 2018, the US airline industry raked in an additional $27.3 billion in profits. They then used nearly all of that money, a whopping 96 percent, to buy back shares from stockholders-- a move that enriches investors while doing nothing for the company itself-- and handsomely compensating executives.

Now, the airline industry, like nearly every other industry, is suffering due to the unprecedented coronavirus travel restrictions. The airlines are asking the federal government or a bailout of almost $60 billion, to be paid for with our tax dollars.

To which I say: Fuck that. The airlines shouldn’t get a dime from American taxpayers unless there are so many strings attached it can support a 787.

If a working class person had handled their finances in the same way the airlines have, it would be a caricature of a Republican talking point about individual responsibility. During the good times, airlines spent all of their money on financial chicanery and self-enrichment while saving virtually nothing for a rainy day. Now that the good times have stopped, they’re rapidly running out of cash, which is what tends to happen when you don’t have much sitting around. It’s like a meme about millennials and avocado toast except it’s about the boomers who run airlines.

You could be excused for doing this once, but not twice. The airlines should have learned their lesson after the September 11 bailouts that they are not normal companies. The industry, already in financial trouble, saw demand collapse all at once after which the feds gave them $18.6 billion in direct assistance and loan guarantees. The lesson here ought to have been that airlines are uniquely vulnerable to huge shocks and need to plan accordingly. These do not happen often-- oh, once every 20 years, thereabouts-- but often enough. That was not the lesson the airlines learned.

I suppose the airlines did have a plan. The plan was to get bailed out by us.

Fair play to the airlines, because they almost certainly will. Congress, which is comprised of some of the most frequent fliers and loyal airline customers in the country, will oblige them. Our political leaders will almost certainly meet the airlines on the industry’s terms because Congress overvalues the airlines themselves relative to the average American. A 2018 survey by an air travel industry group found 52 percent of Americans didn’t fly at all in 2017, and nearly three quarters of all trips were personal, not business. And airline flyers are disproportionately higher income, with the majority of airline trips coming from Americans with an annual household income of at least $75,000, well above the median household income (the most frequent fliers by income group, according to the airline industry survey, make more than $150,000 a year).

Airlines and other pro-business groups will argue a bailout is necessary in order to prevent massive job losses, an argument that made sense in 2001 when airlines were bearing the brunt of the recession following September 11 and mandatory flight groundings. But that argument doesn’t make sense today, because everyone is hurting just as much. The airlines, while experiencing massive revenue losses, can get in line with every other industry experiencing massive revenue losses, including but not limited to the entire hospitality and travel industry.

Even within the transportation industry, airlines don’t have a special case for bailouts. Public transportation is experiencing a similar shock, with ridership and revenue drops in line with what airlines are experiencing. According to the Bureau of Transportation Statistics, they employ the same number of people. Public transit agencies-- which, it’s worth bearing in mind, are publicly owned and operated, not private corporations-- are also asking for federal funds so they can keep running service for critical workers like hospital and grocery store staff, but they’re asking for about $13 billion, or about one-fifth of what the airline industry wants.

Fake Magic by Nancy Ohanian

Some, like Florida Senator Rick Scott, have argued against bailouts of any kind for anyone, including the airline industry. At the very least, industries like airlines that quite clearly have embedded federal bailouts as part of their long-term plans need to have their courses corrected.

The exact details are up for debate, but fundamentally, the government must set a precedent for corporations that spend the boom years enriching themselves and their shareholders only to crawl to Capitol Hill hat in hand. Rather than filling up the hat, they ought to get a kick in the butt.

Massachusetts Senator Elizabeth Warren laid out a plan (of course she did) of what this might look like for companies that get federal funds including: a mandatory $15 an hour minimum wage for all employees, a permanent ban on stock buybacks, no dividends or executive bonuses for three years, and criminal penalties for CEOs who violate any of these rules. It’s a start.

We must also stop the cycle of corporations privatizing profits while socializing costs. Why should we, the taxpayers of the United States, spend $50 billion or $60 billion or whatever it may be when we see nothing in return? As of this writing, the total market cap of the Big Four US airlines is $54 billion, almost exactly the value of the bailout being proposed. What if, instead of bailing out the airlines, the US government became the majority shareholder of each so it could profit from its investment?

This is not some pie-in-the-sky proposal. It’s exactly what happened with Conrail, a government-created railroad entity formed in the 1970s out of the bankruptcy of a bunch of private railroads including Penn Central. The government bought the bankrupt railroads for dirt cheap then privatized Conrail in the late 1980s once it started turning a profit, netting some $3.7 billion in 2020 dollars for taxpayers.

Whether or not that specific model is right for the airline bailout is up for debate. But the general idea, that the public needs to stop subsidizing the irresponsible financial behavior of large corporations while the average taxpayer suffers, needs to be the focus of Congress going forward. Maybe, just maybe, we can come out of this mess with a fairer and more equitable relationship between corporations and the American public. And, while I’m dreaming, with some minimum leg room requirements, too.