Until we punish American greed, no coronavirus bailout will save our warped economy | Will Bunch
As corporate lobbyists push for goodies and members of Congress profit, America is doomed if we repeat 2008 mistakes and don't punish greed.
In a time of a deadly coronavirus, America needs to have a serious conversation about something else that kills: greed.
Consider the case of one of U.S. capitalism’s iconic brands and one of our largest private employers, the aircraft giant Boeing Co. In 2018, the giant manufacturer was a huge beneficiary of President Donald Trump and the then-GOP-dominated Congress’ massive corporate tax giveaway — but rather than plow that money into upgrading its manufacturing plants, rewarding its blue-collar workers, or saving for the inevitable rainy day (for a firm with roots in Seattle, no less!), Boeing’s executives decided to get drunk on stock buybacks.
From 2013 through 2019, the company spent a huge chunk of its profits — on either dividends for its shareholders or buybacks of outstanding stock, which increases the share price to enrich both Boeing’s top execs and its Wall Street investors. As the buyout binge boosted Boeing stock to atmospheric levels, the firm scrimped in other areas, like R&D. When it came to its new commercial jetliner the Boeing 737 Max, the Financial Times reported that “[i]nstead of building a wholly new aircraft, Boeing simply bolted new fuel-efficient engines on to a tweaked existing airframe” — scrimping to have more dollars for the buybacks.
The consequences were beyond tragic. Triggered by a software flaw that was ignored by Boeing and the Trump administration’s business-friendly regulators, two 737 Max crashes last year in Indonesia and Ethiopia killed 346 people. The fiasco also caused Boeing’s stock price to fall to earth, led to scores of canceled orders and put the jet maker on the brink — until the firm’s lobbyists found the most unlikely possible savior: the coronavirus.
With much of the economy ground to a complete halt by the global pandemic, Congress — with more than a little help from its lobbyist friends — is racing with indiscriminate speed this weekend to pass what could be a $2 trillion coronavirus relief package in a frantic bid that still might not be enough to forestall a second Great Depression.
And you probably won’t be surprised to learn who was cutting to the front of the bailout line. Or that the amount that Boeing is asking for is exactly the same amount of cash it burned these last six years to prop up its now-in-the-toilet stock price: $60 billion ... or more! The corporation clearly hopes the admittedly real threats to its business from the pandemic and a dramatic drop in air travel will make you forget about the years of mismanagement and unvarnished greed. Even the Trumpist Nikki Haley, a board member, resigned over Boeing’s sheer chutzpah.
Boeing is hardly alone, though. Once upon a time, the challenge posed by World War II led to victory gardens and sacrifices like gas rationing, but so far in 2020 talk of a coronavirus bailout has corporate lobbyists lined up like pigs at a trough, asking for actually more than $2 trillion and hoping that laid-off or debt-burdened citizens move to the back of the line. And they’re also hoping you’ll toss down the memory hole that $1.5 billion tax giveaway in 2017 they lit on fire.
It’s easy to look at America’s empty airports and feel sorry for the beleaguered airline industry. But just like Boeing, the nation’s six largest commercial carriers, in a notoriously volatile, bankruptcy-plagued industry, spent nearly $50 billion over the last decade on stock buybacks. That was reportedly 96% of their free cash flow! Yet here come the airlines, hat in hand, asking Washington for another $50 billion to stay in business.
“Let me be clear: We’re not doing no-strings-attached bailouts that enrich shareholders or pay CEO bonuses," Massachusetts Sen. Elizabeth Warren posted on Twitter. “Period.” But while progressives like Warren see an opportunity in this crisis to reshape some of the excesses of 21st-century capitalism, it’s not clear whether Trump, Senate Majority Leader Mitch McConnell, or the corporate lobbyists with friends in low places in both parties will let that happen.
While the number of U.S. coronavirus cases spiked over the weekend, the near totally shutdown economy has managed to shine a bright light on the erosion caused by decades of gross economic inequality and runaway vulture capitalism. On the light end of that scale, we’re seeing in real-time what the lack of universal health insurance, paid sick leave and accessible child care — and the fragility of “gig” workers who live paycheck to paycheck but don’t qualify for unemployment insurance — means for millions of endangered employees.
But on the overweighted side of that same scale, we’re also starting to see how shareholder-first capitalism — with its shortsightedness and ridiculously bloated CEO pay — is that culprit that robbed us of both that safety net and any nest egg that we needed in a crisis like the current moment. And the culture of rampant greed that clogged those arteries may be too thick for even today’s talk of emergency surgery.
The same crude instincts that caused Boeing to worry more about keeping its investors’ yachts afloat than keeping its passengers in the sky were on display as it came out that a gaggle of senators and House members — most egregiously new Georgia Sen. Kelly Loeffler, who’s married to the chairman of the New York Stock Exchange, and North Carolina Sen. Richard Burr — dumped millions of dollars of stock before the crisis hit.
Burr, Loeffler, and some of the others had received classified intel briefings that the pandemic would be worse than the Trump administration was telling the American people. But instead of warning the voters who’d elected them, they issued more bland Trumpian reassurances — right after they’d frantically dialed up their broker. They should be prosecuted under the 2012 law that regulates insider trading by Congress — and so should other white-collar criminals who’ve gotten a free pass from the Trump administration.
On Friday, two pieces of news came out of Goldman Sachs, the Wall Street firm that has come to symbolize the Gordon Gekko era of American greed in the form of a vampire squid. Goldman’s economists were out warning that the U.S. economy could shrink as much as 24% in the current quarter, a number that exceeds the worst of the early 1930s. Maybe not coincidentally, the firm’s CEO announced he was grabbing a 19% raise — the biggest one at Goldman since 2007, or right before the last fiscal meltdown.
The top levels of American business and politics are so addicted to greed that they continue to prowl the virus-infested corridors of Wall Street or the Capitol, so desperate for their next fix. They desperately need an intervention, and now the coronavirus crisis — as awful and undesired as it is — is here to provide that opportunity.
The first coronavirus legislation was a half-empty-half-full glass of good intentions that aimed to expand paid sick leave but — thanks to the insistence of McConnell and the rabidly pro-business crowd — somehow left out millions of workers, including those at large employers like Amazon. With the new bailout package, Democrats need to use the fierce urgency of now and their legislative assets — House Speaker Nancy Pelosi’s majority and a big-enough minority to filibuster in the Senate — to insist on meaningful change.
That means:
Language to ensure not only that no bailout dollars are spent on the insanity of stock buybacks but that serious limits — if not an out-and-out ban — are placed on this failed and shortsighted practice going forward.
Real restrictions — again, not just with the federal relief dollars but, hopefully, permanent ones — on exorbitant CEO pay and executive compensation, after an era in which bosses who once made about 35 times as much as their workers saw that balloon to 350 times or more.
While those two provisions would have to be the bare minimum, let’s also hope that Big Business’s seemingly desperate need for federal help will require its members to consider other aspects of an equitable post-2020 U.S. society, which could and should include things like a commitment to $15 minimum wage, curbs on coronavirus-related layoffs, ethical reforms such as worker seats on corporate boards or restrictions on political spending, or even a commitment to tackle climate change after three-plus years of federal inaction.
Luckily, we already have a blueprint for how to attack an economic depression in FDR’s New Deal. While it’s best remembered for its people-oriented programs like Social Security and unemployment insurance, that agenda also included measures like the Glass-Steagall Act and the creation of the Securities and Exchange Commission that tackled the abuses in the financial sector that caused the markets to crash in 1929.
This time around, we already hear business leaders bargaining like desperate alcoholics — Boeing’s CEO ended both dividends and his own pay ahead of begging for that $60 billion — but the sad truth is that we can no longer trust them. The corruption in our business and political classes needs to be cleaned up, not voluntarily but under the strict color of law, and the reality is that the urgency of this crisis is the one and probably the only lever we have.
America will never fully recover from the coronavirus unless we can clean out the bugs that have infested U.S. capitalism for a long, long time.