Coronavirus

Trump Administration Swears Proposed Hotel, Airline, Cruise Bailout Is Totally Not a Bailout

Actually, it's a bailout.

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The White House and congressional Democrats are reportedly set to pass a short-term relief package to protect some politically favored industries from incurring financial losses due to the outbreak of coronavirus.

Just don't call it a bailout, says Treasury Secretary Steve Mnuchin.

"This is not a bailout," Mnuchin said, according to The Washington Post's Jeff Stein. "This is considering providing certain things for certain industries. Airlines, hotels, cruise lines."

So you might say it's a bailout.

The specifics of the package have not yet been released, but Mnuchin says the two sides have been talking about a smaller aid package aimed at "businesses and workers" that may be particularly hard-hit by the expected economic downturn triggered by the disease. He compared it to the type of disaster relief bill Congress might typically pass in the wake of a natural disaster like a hurricane.

There's no price tag on the deal, which is still being negotiated, but The Wall Street Journal reports that lawmakers expect it to be "in the billions."

And that's just the start.

"This package isn't going to include everything," Mnuchin said Wednesday. "This is round one. We'll be back for more."

As foolish as a bailout for the leisure industry might be, it also might be the least bad option currently on the table. Politico reports that House Speaker Nancy Pelosi has squashed Trump's initial coronavirus stimulus proposal: a payroll tax holiday that would extend through November.

Fiscally, a payroll tax cut would be utterly irresponsible. The payroll tax funds Social Security, Medicare, and Medicaid—all of which Trump has sworn to protect from cuts. That means his proposed payroll tax cut would only add to the shortfalls already facing those entitlement programs. According to the Tax Foundation, a nonpartisan tax policy center, Trump's proposed payroll tax holiday would reduce revenues by $900 billion between April and November.

And it would probably fail as a way to stimulate an economy hobbled by a pandemic anyway. Because the economic shock from the coronavirus is likely to be a supply-side disruption, stimulating demand—and that's what a tax cut would try to do—would be of limited use.

"Big tax cuts—such as the proposed employee payroll tax cut—seem an expensive blunt instrument for alleviating distress," writes Ryan Bourne, an economist with the Cato Institute, a libertarian think tank. "If social distancing is necessary, we don't want employees out spending more money because they have more in their pockets."

The timing is also pretty convenient if you were, say, a president running for re-election who has been pushing for a payroll tax cut since well before the coronavirus outbreak began. Tax cuts are great, of course, but they have to be accompanied by spending cuts (which this wouldn't be) and tax policy should not be dictated by how it will affect the president's poll numbers.

There is one worthwhile tax policy idea under consideration, however. Mnuchin said Wednesday that the administration is considering a plan to postpone the April 15 income tax deadline. Not requiring Americans to pay their taxes on time would keep an estimated $200 billion in the economy—rather than having it vacuumed up by the government—and the fact that those tax bills would still be due at a later date means this approach wouldn't add to the deficit.

Another good idea would be for the Trump administration to lift the tariffs it has imposed on steel, aluminum, and imports from China. Politico reported Wednesday that business and industry groups are lobbying Congress and the White House to include tariff relief in any coronavirus stimulus package. Some House Democrats have already climbed aboard the effort, according to a report from Inside Trade.

On one hand, yes, this is just another example of a politician or interest group using the coronavirus as an excuse to pass policies they already wanted. On the other, lifting the tariffs would be a big economic boost that comes without any of the downsides of cutting the payroll tax.

The only problem? The Office of the U.S. Trade Representative, Politico reports, "was not receptive" to the tariff-cutting plan. Of course.

But none of this should be a surprise. The Trump administration says China is paying for the tariffs, despite all available evidence to the contrary. They said the 2017 tax cuts would pay for themselves without spending cuts, but that didn't happen.

Now Mnuchin says a bailout isn't a bailout. Don't buy that either.

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  1. Everything Trump does is wrong! Open the borders! Get rid of the tariffs! This way people can finally go out and buy that bottle of Scotch that they previously couldn’t afford!

    1. This just in. Guzba for bailouts. Radically conversative Guzba wants to funnel money from your pocket to Delta or maybe Trump Hotel or some company really worthy.

      1. Stop pretending you pay taxes. The only thing in your pocket is ball hair and lint.

    2. He’s a politician. Of course everything he does is wrong.

      You, on the other hand, seem to think that any criticism of Trump is criticism of everything Trump does.

      1. Well, when Reason criticizes literally everything Trump does, criticism of Trump becomes criticism of everything Trump does.

        1. I think you literally do not know what that word means.

          1. The only article I can think of reason actually giving Trump slight praise is the one where the article focused on Trump reducing regulations, but then turned it into not reducing them enough.

            Do you have another example?

  2. Trump’s proposed payroll tax holiday would reduce revenues by $900 billion between April and November.

    But The Dotard LOVES deficits! He is the self-proclaimed ‘King of Debt’!

  3. Politico reported Wednesday that business and industry groups are lobbying Congress and the White House to include tariff relief in any coronavirus stimulus package.

    BUT The Dotard LOVES TARIFFS!

    1. You molest children.

  4. People are told to have an emergency savings fund to cover 6 (9 or 12) months of expenses. What’s the advice for businesses?

    1. Very good point.

    2. Generally about the same, though it varies by industry. Having too little makes you vulnerable to bankruptcy merely because of short-term cash flow fluctuations. Having too much makes you a take-over target. 6-9 months of operating expenses is a decent rule of thumb for cash management.

    3. The current advice is to own 6 to 9 pols in case of either emergency or stock market flatulence.

  5. It’s not a tumor bailout! Bailouts are when you give money to businesses that do shitty things, this is giving money to businesses that have had shitty things done unto them. It’s not these businesses fault that shitty things happened to them so of course the taxpayers should be on the hook for making them whole because it wasn’t the taxpayers fault, either.

    Hmm, now that I say it, it doesn’t seem to make as much sense as when I first thought it. I’m sure somebody will be along shortly to explain why I should pay for something that’s not my fault just because it wasn’t somebody else’s fault, either.

    1. Something, something… that’s the cost of living in a free society.

    2. “We must abandon free-market principles to save the free market system.”

      1. ….and Communism; It’s for the Children..

  6. I blame justice “a tax isn’t really a tax” Roberts.

    This kind of it isn’t when it is, is how the ACA survived.

    1. Some people did something.

      1. “This is considering providing certain things for certain industries.”

    2. it takes several years on the federal bench and the votes of senators to be permitted to write such baloney and make it stick to the wall.

  7. Salient point- consumers having more money isn’t gonna make a difference in the face of a pandemic. Not like all of a sudden sports games will then allow spectators or people will be convinced to go to non-existent conferences, etc.

    Give it up Keynesians- some things are out of your control and throwing money away for no reason doesn’t make sense.

  8. “‘…Airlines, hotels, cruise lines…”’ take a hit anytime the economy gets a shakeup, no matter the reason for the shake up: for most people, the first things they cut from their budget is money for holidays and vacations, hence the hurt for these industries. I am thinking that these industries already know this and plan accordingly.

    Or shall we just start bailing out these (or other) industries every time the economy hiccups… just… because….?

    1. … because holidays and vacations are — dare I say it? — A BASIC HUMAN RIGHT!!

      1. LOL… yeah, I forgot… as is chocolate ice cream.

        1. and a pony!!! (as someone else here usually comments)

  9. >>The payroll tax funds Social Security, Medicare, and Medicaid

    there are funds in SS, Medicare & Medicaid?

  10. Where is the Boehm article about relying on supply chains with partners that don’t actually participate fairly in a free market? No comment on China ordering ships to divert supplies already sold back to China? I know I know, bumper stickers tell you to continue to ignore reality and simply scream Free Market at everybody as if it means something.

    1. And no article that I’ve seen so far on China’s open threat to cut us off from medicines they produce (which is most of our antibiotics). Or their attempts to say the U.S. started the Wuhan coronavirus.

      Funny how authoritarian China seems to get an awful lot of cushion from a supposedly libertarian media outlet.

      1. Meh. We’ll just buy our drugs from Canada and Mexico, right?

        1. We’ll have to subsidize them first like we did China. All U.S. manufacturing went to China because the U.S., their free-trade initiatives and the U.N. decided to subsidize them and charge us for it.

  11. I’m having a hard time remembering. What business is Trump Inc in? I know he’s proposing emergency relief for the hospitality industries – hotels and airlines and such. And I know Trump is an altruistic man who would never put his personal interests above those of typical Americans. So I’m pretty sure Trump International doesn’t run hotels and resorts and such, because Trump would never propose a taxpayer bailout for his own businesses. No! Not our Donald.

    1. lol.. In TDS land Trump is the bellboy, manager, janitor and every other Hotel Job + all other Hotels he doesn’t own (including the one he signed over to his siblings). Whatever it takes to make the narrative stick right??

      1. The fact is that we can address the bell boys, desk clerks and maids using unemployment insurance if they are laid off. We can also insure these people get health care coverage. No need to give the money to the top and hope it trickles down. If we need to get the money to the people having problems.

        1. Leave me out of your [WE] delusions would you? You are not my dictator no matter how much you think you are.

  12. If Trumpy gives money to the hotels/airlines/travel businesses, I don’t agree with him. On the other hand, when he cancels all flights to Europe (except UK) that seems like a “taking” to me, for which there should be some compensation. No different than if they used eminent domain to take your house.

    1. Is that like ’emotional’ damages or something? You hurt my feelings so I deserve $30M dollars!!!

  13. I am making a good salary from home $1200-$2500/week , which is amazing, under a year back I was jobless in a horrible economy. I thank God every day I was blessed with these instructions and now it’s my duty to pay it forward and share it with Everyone, Here is what I do. Follow details on this web… Read more

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