Debate Primer: CARES Act Corporate Bailouts
In late March, Congress passed the CARES Act, a comprehensive $2 trillion stimulus package to aid an American economy reeling from coronavirus protection measures. As businesses have shuttered and Covid-19 case numbers have skyrocketed, the United States has seen nearly 30 million new unemployment claims over the last month and daily falls in the Dow Jones Industrial Average of up to -13%. These are unprecedented figures. Individual industries, like air travel and meat processing, have asked the government for bailout money as they struggle to stay liquid.
The question before us on Monday evening at 7pm CST (we hope you’ll join us—check our Facebook for a Zoom link!) is whether the government should engage in bailouts to big businesses like these, in principle.
The 2008 recession saw some of the largest corporate bailouts in history. Following the collapse of Lehman Brothers, the federal government authorized bailouts for and orchestrated takeovers of some of the largest American financial institutions, like American Insurance Group (AIG), Bear Stearns, Citigroup, and Bank of America. The big three auto manufacturers, Ford, Chrysler, and General Motors, all received bailout money to offset the downturn in consumer car purchases. The $500 billion TARP program sent money to other sources of economic instability, mainly banks and large businesses across the country. (For a history of government bailouts, look here).
Criticism of government bailouts has come from both sides of the aisle. The Occupy Wall Street movement, which lasted for two months in late 2011, protested income inequality in the United States and brought conversations surrounding corporate greed and “corporate socialism” to the mainstream. The Tea Party movement, a small-government, free-market phenomenon on the right, was in part born from libertarian dissatisfaction with government support for insolvent businesses.
Centrist defenses of government bailouts cite the need for economic stability and prevention of job losses. (For a more academic take, click here; for a more casual one, try this).
Today, the debate surrounding government bailouts is once more on the table. If the government bails out businesses that might go under, is the Treasury essentially picking who survives? Did big businesses bring this crisis on themselves in the last few years by misappropriating funds during good economic times? Will the collapse of airlines and energy firms lead to drastic unemployment? Are bailouts the only way? These are some of the important points of contention that we’ll consider tomorrow. We hope to see you there!
