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COVID-19

Is it time yet for the government to bail out some large companies hurt by COVID-19?

Mitchell Hartman Mar 20, 2020
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President Trump said Thursday he supports the U.S. taking equity stakes in companies that receive assistance. Evan Vucci-Pool/Getty Images
COVID-19

Is it time yet for the government to bail out some large companies hurt by COVID-19?

Mitchell Hartman Mar 20, 2020
President Trump said Thursday he supports the U.S. taking equity stakes in companies that receive assistance. Evan Vucci-Pool/Getty Images
HTML EMBED:
COPY

In the next round of economic rescue measures for COVID-19, the White House has requested $50 billion to help U.S. airlines stay alive, and another $150 billion for other distressed industries. 

The government could take an equity stake in companies that get bailout money. That’s what happened during the financial crisis a decade ago. President Donald Trump and White House economic advisor Larry Kudlow have both expressed support for the idea in recent days.

Such a plan would give big publicly-traded companies billions to keep the lights on, and keep workers on the payroll. In exchange, the government would get stock ownership. 

The bank and automaker bailouts in the financial crisis worked the same way. As the economy recovers, the government sells off its stock.

“The financial rescue bailout doesn’t end up costing the U.S. taxpayer any money,” said Austan Goolsbee, who chaired President Barack Obama’s Council of Economic Advisers. He said taking equity could give the government leverage over how bailout money is used, like for example “imposing employment agreements that they can’t take the money, fire all the workers,” Goolsbee said. Or use it to pay big dividends to shareholders.

Michael Graetz, professor of tax law at Columbia Law School, said government equity investment is a bad idea.

“I don’t think most large businesses are cash-constrained,” he said, adding that government loans for companies most at risk would be the better way to go.

COVID-19 Economy FAQs

So what’s up with “Zoom fatigue”?

It’s a real thing. The science backs it up — there’s new research from Stanford University. So why is it that the technology can be so draining? Jeremy Bailenson with Stanford’s Virtual Human Interaction Lab puts it this way: “It’s like being in an elevator where everyone in the elevator stopped and looked right at us for the entire elevator ride at close-up.” Bailenson said turning off self-view and shrinking down the video window can make interactions feel more natural and less emotionally taxing.

How are Americans spending their money these days?

Economists are predicting that pent-up demand for certain goods and services is going to burst out all over as more people get vaccinated. A lot of people had to drastically change their spending in the pandemic because they lost jobs or had their hours cut. But at the same time, most consumers “are still feeling secure or optimistic about their finances,” according to Candace Corlett, president of WSL Strategic Retail, which regularly surveys shoppers. A lot of people enjoy browsing in stores, especially after months of forced online shopping. And another area expecting a post-pandemic boost: travel.

What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?

Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”

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