Tag Archives: political economy

Government Aid and Government Stakes

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The current version of the Federal assistance to American airlines contemplates the government taking stakes—in the form of warrants convertible to (voting) common stock—in return for sending money to the airlines to help tide them over the disruptions resulting from the current Wuhan Virus situation. There are a number of objections to such a condition, most of them valid. Flight attendant unions have their own objection. They’ve

urged federal officials not to make grants to airlines contingent on government stakes, saying they believe executives would refuse—costing jobs in an industry hard hit by the coronavirus pandemic.

I have a couple of thoughts on the flight attendants’ objection; I’ve already expressed my objections to the government taking stakes in private business.

One thought is that the jobs supposedly to be lost would be, primarily, union jobs, and that can only be good for the airlines’ bottom lines as labor costs come down, especially if replacement hires on the turn-around are not from unions, and that would be terrific for the traveling public.

The other thought is that it’s not a foregone conclusion that the airlines, or very many of them, actually need government assistance, for all that airline management would like to have such bailouts.  Recall the Panic of 2008, wherein three auto companies of the American auto industry, supposedly needed government bailouts. GM and Chrysler jumped on those bailouts with both feet. Ford, though, despite pressure to take the bailout, refused to take the money; it said it would stand on its own feet (it did take a credit line against a potential need, but it never did tap even that).  Ford is thriving today, even playing a leading role in producing badly needed medical equipment.

So it will be for competently managed airlines centered in the US.

What Are They Going to Do?

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Cut us off?

The chairman of Huawei Technologies Co warned the US to expect countermeasures from the Chinese government if it further restricts the technology giant’s access to suppliers….
Eric Xu, Huawei’s chairman, said he believes Beijing would respond with restrictions of its own on American companies operating in China if the US.

In addition to the draconian restrictions already inflicted on American companies—and other nations’ companies—operating in the People’s Republic of China. These restrictions include demands for government-controlled backdoors into companies’ operating software and transfer of companies’ technologies to domestic partner companies—which are required for most foreign companies in order to operate in the PRC.

With the PRC’s threat to cut us off from needed medicines, intermediate medical chemicals, and medical equipment, and the PRC’s recent attempt to restrict access to rare earth elements, it’s become clear that our manufacturers—and Europe’s, come to that—need to revamp their supply chains to vastly reduce their dependence on PRC intermediaries and suppliers, if not eliminate that dependency altogether.

Xu’s threat only emphasizes that need.

State Governments and Socialism

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A current government move to control the means of production—classic socialism when the controls are widespread—is this, involving what’s left of our nation’s insurance industry, at the State level.

In at least three states, lawmakers have proposed legislation to force insurers to pay billions of dollars for business losses tied to government-ordered shutdowns.

Never mind what already agreed policies say. To Hell with signed contracts. Government men Know Better, and being above petty commitments themselves, can’t conceive the idea that commitments actually matter in a free society, in a free market economy.

Some regulators have declared moratoriums on cancellations and nonrenewals of policies.

This is Government assuming control of the insurance companies and dictating what they will produce.

Here is the blatantness of the power grab made manifest:

In Massachusetts, state Senator James [Jamie] Eldridge (d) said that the depth of the coronavirus pandemic has made bold legislative action a necessity. A bill he has proposed would require insurers to pay so-called business-interruption claims to small businesses even if policies contain virus exclusions.

Insurers get reimbursed later? No, they’ll have to apply to Massachusetts’ Progressive-Democratic government-appointed insurance commissioner for that, and the commissioner would be authorized to bill those same insurers, “possibly over years,” to cover the payouts. I am altering the deal; pray I don’t alter it any further.

Of course, all of this is for the best of reasons and soundest of motives. For some politicians, that’s actually true, too, regardless of the misguided nature of their actions.

For most, though, this is just another implementation of Progressive-Democrats’ mantra of never letting a crisis go to waste; they’re just too useful for expanding government power.

Progressive-Democrats and the Law

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And contracts.  Since the SARS epidemic of some years ago, insurers have declined to cover losses related to virus or bacteria damage, and they wrote their policies to that effect. State regulators—who controlled and still control the structure of insurance policies and the premiums allowed to be charged for those policies outside Obamacare—agreed.

However.

New Jersey Assemblyman Roy Freiman, a Democrat, introduced a bill that would retroactively rewrite interruption coverage contracts and force insurers to foot some losses for any policyholder with fewer than 100 full-time employees.

Contracts be damned. They don’t fit the Progressive-Democrat agenda, so by Progressive-Democrat-run Government fiat, they must be tossed.

Here’s the kicker, though.

Mr Freiman says he doesn’t know if he has the legal authority to do this, but he says he doesn’t care.

The law be damned too—it’s in the Progressive-Democrat’s way. Don’t get enough of his fellows in the legislature to agree with him and change the law. Don’t get actual voters to agree with him and so get legislators to stand with him to change the law.

No. The Progressive-Democrat already Knows Better; everyone should just get out of his way so he can toss the law without any silly delays from the ignorant unwashed.

It Depends

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The Wall Street Journal‘s editors are stewing about the Wuhan Virus relief bill that just passed the Senate. To an extent, the WSJ is justified in its concern; $2 trillion isn’t chump change (the editorial was written before the Senate voted the bill up, so details at the link might differ from Senate-passed reality). Couple things about the paper’s concern, though.

The bill includes $250 billion for $1,200 payments to Americans whether or not they’re affected by the virus. The cash will do little or nothing to help an economy closed by government fiat.

All Americans have been, and remain, economically affected by the virus and the government-mandated shutdown of our economy; the $1,200 isn’t for medical treatment. The rub here is whether the money arrives in individuals’ pocketbooks soon enough to do them any good in the immediate exigency. The Senate version of the bill (the Progressive-Democrat House won’t take the bill until today, and Speaker Nancy Pelosi (D, CA) is making noises like she’s in no hurry, and she still has roadblocks to throw down) promises the money as soon as possible, but in any case, no later than 31 December.

Assuming the money arrives soon enough, the editors’ concern about helping the economy seems overstated. Whether the money does anything for “an economy closed by government fiat” depends on the duration of the fiat. President Donald Trump has set an aspirational goal of “open by Easter,” but realization or further delay will depend on the medical facts extant at the time—facts that, contrary to journalistic and Party rhetorical implications, are constantly updated and considered.

Speaker Nancy Pelosi managed to earmark $25 million for, er, virus relief for Washington’s Kennedy Center for the Performing Arts.

That is pork, and it’s a harbinger of the roadblocks to come now that the bill is in Pelosi’s House. On the one hand, though, no less a light than Congressman Jerry Nadler (D, NY) has identified the center as symbolic of New York City and so, of course, a Critical Item. On another hand, those $25 million are 0.00125% of the total bill; if Pelosi and Nadler really will rent themselves so cheaply, it’s not a deal worth blowing up national relief for. Thursday night hookers might be, relatively, more expensive.

Finally,

Journalists will need weeks to cull through the pages and figure out what it all really means.

So will honest Americans and our businessmen. [/snark]