Biden Celebrates $90 Billion Bailout of Private Union Pension Plans

“a $90 billion bailout of union retirement plans—one that’s completely paid for with federal borrowing.

The bailout was approved last year as part of the American Rescue Plan, the $1.9 trillion emergency spending bill that was ostensibly meant to combat COVID-19 but included an impressive array of spending that had nothing to do with public health. The bailout will direct funds to more than 200 nearly insolvent multiemployer pension plans, which are established jointly by unions and the private companies that contract with them through collective bargaining agreements.”

“Millions of union workers, that is. If you’re not part of that select club, there’s no bailout coming your way—even as a sagging economy eats into private retirement savings, inflation makes every saved dollar worth less, and Social Security looms on the brink of insolvency.

Oh, and you’ll have to pay back (with interest!) the money borrowed to make this bailout (and the rest of the American Rescue Plan) possible. Sounds like a great deal, right?”

“What happened to the private multiemployer pension systems will sound familiar to anyone who has followed the slow collapse of public sector pension plans in many states. A 2018 study by the Government Accountability Office found that the Central States Pension Fund, one of the largest and most deeply indebted private multiemployer funds, would have 91 percent of the assets necessary to cover future costs if it had achieved its target annual financial return of 7.4 percent every year since 2000. Instead, the fund has earned an average of less than 5 percent annually and was on pace to run out of money by 2025. (It’s also worth noting that there are more than 1,400 multiemployer pension plans out there; most are well-managed and not at risk of insolvency.)”

“”creates perverse incentives for further mismanagement and underfunding and leaves the taxpayer holding the bag.””

“For the roughly 3 million workers enrolled in the sinking multiemployer plans, the situation may well have been dire. But it wasn’t an emergency. Congress had been bickering for years over how to deal with this problem—until the American Rescue Plan offered an opportunity for a party-line vote to approve a bailout for a constituency that reliably votes Democratic.

In that regard, this is something of a no-brainer. Biden delivered a major win to his labor union allies, put the cost on the taxpayers’ tab, and took a victory lap for doing it.”

The Restaurant Industry Doesn’t Need Another Bailout

“The argument for bailing out restaurants is thus morphing from a need to save the industry during the pandemic to a desire to relieve it from persistent challenges that have less and less to do with COVID-19.

That’s hard to justify when the industry itself is on a steady track toward recovery, and federal spending is driving inflation to record levels.”

Prisons, Water Infrastructure And Broadband: Where States Are Spending Their Pandemic Relief Funding

“combined with previous coronavirus response bills and spending packages, the federal government has now spent almost $5 trillion addressing the pandemic”

“It’s not clear yet where all this money will go — states have an enormous amount of leeway as to how they’ll spend it and until 2026 to do so. (In total, $155 billion went out to states in 2021, with the rest due to be distributed later this year.) Most states have used the windfall of cash to address the budget problems caused by the economic downturn following the pandemic and to address the inequities thrown into sharp relief during the past two years. But while there are broad commonalities in how states have spent the money, it’s also true that how relief from the pandemic is defined varies widely — not necessarily across partisan lines but in ways that are still shaped by local conditions and ideology.”

“Almost every state that has allocated money so far has spent some on broadband, water and sewer infrastructure”

“Infrastructure has also been a big priority for states like Florida, which is spending money on highways and other transportation projects that had been long-planned but unfinished. Lazere said some of the need for infrastructure goes all the way back to the Great Recession, which began in 2007, and the long, slow recovery that followed. “These were areas of need that had not been addressed, [for which] there hadn’t been a dedicated state or federal funding source, so the rescue plan gave them the opportunity to tackle these problems that had been around for a long time,” he said.
Additionally, because the funds are a large, one-time payment, with no expectation that they’ll continue into the future, it encourages spending on infrastructure.

“It really starts with states doing that analysis, to be able to know what’s affordable over the long-term and what’s not,” said Josh Goodman, who is part of The Pew Charitable Trusts’s state fiscal health project.”

“In Alabama, $400 million will be used for building two new prisons.”

“the state has been under a court order to improve mental health care in its prisons since 2017, and advocates of the new law say using the recovery funds to build a new prison will address those problems, as well as overcrowding and inadequate staffing. They also say the new facilities will improve the overall health care and mental health care available to incarcerated individuals.”

“In more liberal states and localities, lawmakers are pursuing new financial assistance programs for local families. One idea that has picked up steam is funding guaranteed income pilot programs, with eligible residents receiving between $500 and $1,000 in cash assistance monthly. Support for these programs has been growing across the ideological spectrum, especially in the last few years.”

The Perverse Incentives of Puerto Rico’s Debt Deal

“While Puerto Rico has failed to make debt service payments since 2017, government spending is up over 12 percent since then despite a drastic population decrease. Long says Puerto Rican officials are realizing “how easy it is to hide financial data, pretend austerity, and fool their creditors.” For its part, she adds, the U.S. government is creating all the incentives for Puerto Rico “to become a serial defaulter, like Argentina,” a country on the brink of its tenth default since 1816.

The comparison is ominous; Argentina’s longstanding practice of acquiring heaps of debt on the global markets before failing to repay it reflects the workings of its internal politics. As scholars Pablo Spiller (of the University of California, Berkeley) and Mariano Tomassi (of the Universidad San Andrés in Argentina) wrote in 2007, Argentina’s brand of federalism combines decentralized spending for the provinces with largely centralized tax collection and funding schemes. The system, which began to arise in the late 19th century, still motivates “subnational governments [to] adopt a lax fiscal stance in the expectation that they will be bailed out in the event of a fiscal crisis.”

In turn, they write, the top regional politicians tend to be the crony machine operators “who are best at the game of extracting rents from the common central pool.” Similarly, negotiating rescue packages with the International Monetary Fund has become a part of an Argentine president’s unofficial job description. Will governors of Puerto Rico assume the same role vis-à-vis the White House and Congress?

Certainly, U.S. taxpayers should consider the long-term consequences of their bailout of Puerto Rico, where children of politicians tend to be overrepresented as recipients of six-figure government salaries and seven-figure government contracts. The habitual debt busts of Buenos Aires is one Latin American export that is better left on the dock.”

Broadway Hit Hamilton Could Get Up to $50 Million Federal Bailout

“That’s the problem with almost all government bail-out schemes. You gotta be in the room where it happens—metaphorically, at least. Successful businesses will always have an advantage over those who lack the lobbyists, name recognition, or culture cachet required to cash in.

On the other hand, the federal government’s firehose of COVID relief spending—$5.9 trillion and counting—means it is easier than ever to get bailed out. So far, the government has responded to the pandemic by sending money to people who earn six-figure paychecks, paying fully vaccinated people not to work even though there are millions of available jobs, bailing out state governments that are running huge surpluses, and using the pandemic as cover for a massive bailout of union-run pension funds, among other things.

Like with Hamilton, there doesn’t seem to be any consideration of when or how much government aid is necessary. We’ve pumped so much money into the system—nearly all of it borrowed and added to the country’s long-term debt problems—and it has to go somewhere.

Did a bunch of fake celebrities whose only claim to fame is being former contestants on The Bachelor need the federal government to dump as much as $20,000 apiece into their bank accounts? Nope, but they got the cash anyway, according to data gathered by ProPublica and reported in a variety of media outlets.”

Poll: Americans are really worried about making sure $1,400 checks go to the “right” people

“A new poll of 1,164 likely voters conducted January 15 to 19 by Vox and Data for Progress (DFP) reveals an oft-ignored truth: Sometimes the reason optimal policy doesn’t happen isn’t because of bad politicians; it’s because voters don’t want it to pass.

In the poll, 60 percent of likely voters said they would support sending a $1,400 one-time payment to most Americans as part of Covid-19 relief. That’s great news — the $1,200 stimulus checks last year were shown to have reduced poverty and helped Americans stay afloat in the first months of the crisis.

But that same number (60 percent) support means-testing the aid, agreeing with the statement: “Checks should be phased out based on income so higher income people receive less money.” The poll, which has a margin of error of 2.9 percentage points, also found that nearly as many likely voters (56 percent) are opposed to sending stimulus checks to undocumented people.

Voters may not fully understand the trade-offs to means-testing and restricting aid to undocumented Americans (namely, that many people experiencing financial difficulties may be left out due to poor targeting). But the stance is consistent with another DFP finding, which Matt Yglesias wrote about for his newsletter Slow Boring, revealing that voters would rather some vaccine doses expire than allow “some people to cut in line.” In essence, that means most voters would rather have more people get Covid-19 and potentially die than have someone get a vaccine dose before they “should.”

Opposition to the wealthy receiving financial assistance from the government and hostility to undocumented immigrants isn’t surprising, but these findings showcase something very important: Voters are so concerned about the perceived “fairness” of the economic response that it could hamstring optimal policymaking.”

“America is in a crisis, and it’s a trade-off between speed and accuracy. Yes, some people who get the money may save it, they may not be financially harmed by the pandemic, and it may feel unfair, but it’s better that everyone struggling gets the money as quickly as possible than we slow down the process over a flawed conception of justice.”

“Proponents of means-testing may point to recent data that stimulus checks to Americans earning over $75,000 don’t benefit the economy — in essence arguing it’s a waste of government spending. However, as Matthews pointed out, the simple fix to this would be to just tax rich people more later to recoup the costs instead of wasting time during a pandemic trying to design the optimal program. Additionally, we only have this data in hindsight — at the time, it wasn’t obvious where the dividing line between “affected by the pandemic” and “unaffected” was.”

“One silver lining in the poll is the finding that 51 percent of likely voters are in favor of automatic stabilizers that “automatically trigger more spending on programs like unemployment insurance or SNAP if the economy experiences a contraction.” It’s something Biden has signaled his support for and that could help the nation avoid wasting precious time the next time there’s a recession.”

$75 Billion in Band-Aids Won’t Cure Ailing Airlines

“Regal Cinemas announced in early October that it will temporarily close all 536 of its U.S. locations as the COVID-19 pandemic continues to keep customers away. This move affects about 40,000 employees across the country. Yet nobody in Congress is talking about a bailout for theaters.

Now compare that with the airline industry.

In April, Congress passed a $50 billion bailout for the airlines, including $25 billion in subsidized loans and another $25 billion meant to keep most airline workers employed until the end of September. As predicted, since consumers were not yet ready to fly, this taxpayer-funded band-aid only postponed the inevitable.”

“Some companies are taking a different approach to retaining their employees. Southwest Airlines, for example, is asking its labor unions to accept pay cuts through the end of 2021 to prevent furloughs and layoffs. Singapore Airlines has done the same.

Airlines also have access to capital markets and have many durable assets they can sell or use as collateral to secure additional financing, even during a crisis. And even without sacrificing these lucrative assets, airlines can turn to their credit-card-issuing partners for liquidity, as they have in response to past financial challenges.

Sadly, as long as demand for air travel remains deflated, there will be no way for airlines to avoid slimming down their payrolls. Subsidies provided under the cover of payroll programs are not necessary to protect an industry that can, and perhaps should, pursue restructuring through bankruptcy. Airlines can continue to fly safely during this process as a judge imposes a stay on creditors’ claims and gives the carriers breathing room until consumers are ready to come back.

Unlike special favors granted by Congress, the bankruptcy process is equitable. It shifts the cost of the crisis onto airline investors, who make good returns during good times in exchange for shouldering the decreased value of their investments during bad times, instead of taxpayers. Without another bailout, the skies that the airlines fly will be fair as well as friendly.”

“Reopening” isn’t enough to save bars and restaurants — the US needs a bailout

“The whole “airborne” debate can get very complicated and technical, but the basic issue is simple: Indoor dining is very unsafe. And the outdoor dining that’s been used as a substitute is running out of steam as weather gets cooler across much of the country. For health reasons, we need fewer customers at these businesses. For economic reasons, we need them to survive. The fix is a huge bailout.”

Airlines Are Asking for a Second Bailout. Congress Should Say No.

“Let’s remind everyone why we shouldn’t bail out airlines. Yes, the coronavirus crisis is both a public health and an economic tragedy. But this doesn’t justify the government granting special privileges to private firms, at least not without those firms first taking other available steps to potentially avoid the need for a bailout.

There are other options they could pursue.

First, the airlines still have plenty of access to private capital markets. They own significant amounts of durable assets that they can sell or use as collateral to get additional financing. Indeed, they’ve been able to secure substantial private capital since the beginning of the pandemic.

Second, if private financing fails, some airlines can and should do what they’ve done in the past when in such a predicament: declare bankruptcy. Past bankruptcies tell us that airlines can continue flying safely even during a bankruptcy, so there’s no systemic risk posed to the economy at large.

To be sure, bankruptcy would mean that, for the time being, airlines may fly on more limited routes. But that shouldn’t be a problem in light of a collapse in demand, which won’t be resolved as long as Americans remain wary of flying.

There’s no easy solution during this pandemic. Many people and businesses have no options at all. But an airline bailout would bring about more negative consequences. The first is that it’s a huge expense for taxpayers to shoulder with no promise for a solid return. We’ve already bailed out the airlines, and all this past coddling has done is to postpone the inevitable layoffs of its excess employees.

Analysts don’t think air travel will return to prepandemic levels for several years—some say up to seven. Let’s assume that it takes five years for air travel to return to its previous level. That would require taxpayers to extend up to $320 billion in bailout funds to the airlines.”