On Wednesday night March 25, after months of unwillingness to agree on much of anything, the US Senate voted unanimously to borrow and spend $2 trillion on an economic stimulus bill that no senator had time to read. Congressional officials were still drafting the bill’s hundreds of pages while it was considered.

The Federal Reserve Bank intends to issue an additional $4 trillion in corporate loans which do not require congressional authorization. Those loans can go to corporations that may not be able to repay them under adverse business conditions. (Baa rating). It is unclear whether and how the loans will be collected if a corporation defaults.

What could possibly go wrong?

Crisis provisions to offset financial effects of Covid-19 on families will have long term effect only if we defeat the virus. There is good support for families in the bill including expansion of unemployment compensation benefits and putting additional cash in the hands of families. That much of the bill will immediately be helpful; and the great majority of that money will flow into businesses as families pay their bills and purchase necessities. It could be called “trickle up economics.”

More than three fourths of the money authorized by the Senate would go to businesses rather than families. Those provisions of the bill have not received the careful consideration that they deserve. They appear to have a reverse Robin Hood effect that would pay tax money to owners of corporations if they do not lay off employees. I’ll use airlines as an example but this applies to any business. The bill would reportedly loan up to $58 billion to airlines. But if an airline keeps 90 percent of their employees on the payroll for a few months then they wouldn’t have to repay the loan.

Think about that for a minute. Money given to a corporation belongs to the stockholders. Taxpayers would give $58 billion to stockholders in exchange for them allowing tax-paying employees to produce profits for those same stockholders. Among the biggest stockholders would be board members and high ranking executives of the airlines — already some of the wealthiest Americans.

There’s another provision that would provide an additional $25 billion of “direct assistance” to airlines. One credible news source (The Hill) reported that, “Senate Republicans on Tuesday were characterizing the direct assistance as ‘snap loans’ instead of grants, to avoid the stigma of the proposal being called a bailout, but it has yet to be determined how the government would be compensated.” Taxpayers shouldn’t provide $25 billion with no provision for repayment.

Our airlines provide important transportation service, and employ thousands of people. We can help by loaning them $58 billion and giving them a generous term to repay us. We want them to succeed and we also want our money back. There’s a straightforward way to do that. The law could require a corporation to repay an overdue loan with newly issued stock at a share price based on the total value of the company’s existing stock.

The government could then recover the taxpayers’ money by gradually selling the new stock into the public marketplace. With some luck, the taxpayers might even make a small profit. As an alternative to the loan, a corporation can issue more shares of stock to raise capital. If the price is right, investors will buy it. The price will be low. The stock price would fall and that is OK. Government’s role is to promote good jobs, not to prop up stock prices.

These ideas are simple and transparent. Everyone can see where the money is going and the taxpayers don’t have to subsidize the corporations. As a last resort if an airline fails, someone will buy their equipment, repaint it and fly the routes at no additional cost to taxpayers.

A free market is an environment where productive, well managed businesses pay good wages to good employees — and where businesses that can’t survive give way to those with better strategy and management. Forcing working class taxpayers to prop up the stock price of a corporation is the opposite. It could be called corporate socialism.

A thriving economy is built on the incomes and spending of consumers, not stock prices. Let’s not have any more corporate welfare to benefit the extremely wealthy. Let’s support working taxpayers instead.

Bob Morrison is a retired health care executive who lives in Asheboro. Read more of his columns at www.bobmorrison.org. Contact: bob@bobmorrison.org.

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