Economist Dean Baker explains how the $2.2 trillion stimulus quietly provides up to $17 billion in loans for Boeing with almost no strings attached.
This is a rush transcript and may contain errors. It will be updated.
ark Steiner: Welcome to The Real News. I’m Mark Steiner. Great to have you all with this. It’s important to begin to examine what’s this coronavirus $2.2 trillion bailout package really means and what it doesn’t. Let’s start with a $17 billion bailout of Boeing that our guest Dean Baker did, and talked about in his blog for the Center for Economic and Policy Research. What strings were attached or were never even tied to it? And speaking of that, was Trump’s statement that he said he didn’t have to be overseen by the Inspector General and Congress, as how to spend the trillion dollars and where it would go.
Other countries have suspended student loans, mortgages, utility payments. And Spain is going even further and nationalized its hospital system. Now are we making much to do out of nothing here, or are we missing something really important? That’s why we’re about to talk to Dean Baker. And Dean, welcome back to The Real News. Good to have you with us.
Dean Baker: Thanks for having me on.
Mark Steiner: And just once again, let me remind you, Dean Baker is the co-director of the Center for Economic and Policy Research, author of numerous books. His latest is Rigged: How Globalization and the Rules of the Modern Economy Were Structured. And he writes the blog of Beat the Press, where he discusses the media’s coverage of economic issues. Let’s start what you started, which is this $17 billion loan to Boeing and what that really means, and what we’re missing in that conversation.
Dean Baker: Well, a couple of points here. First off, it is a loan, and I tried to be fair on this in my blog post. It’s, we aren’t handing them $17 billion. We’re lending them $17 billion. And presumably, they’ll pay it back. But the point here is, we’re lending it at well below the market interest rate. This is a common trick. As you could be sure that if people start to complain about this one, two, three years out, I don’t know how long Boeing will take to repay their loan… we’re going to hear, “Oh, we got paid back with a profit.” Well, that’s fine.
But the point here is, we’re giving it to them at below market interest rate. Every business person knows that’s a big concession. And a really big concession when we’re in a crisis as we are today. I just said, let’s assume that they’re getting a loan at five percentage points less than the market rate. I don’t know whether that’s right or wrong. Could be higher, could be lower, but good place to start. It’s in effect handing them $850 million. That’s a lot of tax payer dollars. But the main point I’d like to make there is that we are giving this to them at below market rate, and that’s often missed or will be missed when people say it got paid back with interest.
Now the other point is that, what are the conditions? Do they have to keep their workers on the payroll? Are they being prevented from paying out dividend share buy backs? Do they give their CEO $15 million? Their last CEO was a disaster, walked away with over $60 million. So the conditions aren’t very tough. The conditions in hearsay, they have to keep workers on and as much as practical. Well, that’s essentially meaningless. People know how to write binding language. That’s not binding, that’s basically a joke.
Mark Steiner: See, that’s really interesting. I was thinking of another issue that actually connects. We look at this $2.2 trillion bailout, and you look at the $17 million given to… Not given as you say. According to the article, it’s not given. Loaned to Boeing, with almost no strings attached in terms of how they can spend the money. And then you heard Trump say the other night that he no longer… he didn’t have to abide by the Inspector General, for the special Inspector General for the pandemic recovery. Tracking loans and guarantees and reporting to Congress. I mean, to me these are really tied together. When we look at this bailout, even though people are in a panic about the pandemic we’re facing, we can miss the point, the fine print that the public doesn’t see and what it could mean for us.
Dean Baker: Yeah. Well, we have an interest in protecting workers. Obviously, it’s not the workers at Boeing’s fault or the other businesses that are having to lay off workers. I’ve seen their markets just collapse in some cases, because they’re literally restaurants. They’re literally prohibited from being open. Many, perhaps in most states. So yeah, it’s not the workers’ fault here. We have a real interest in protecting the workers. We have no particular interest in protecting Boeing’s shareholders or that the CEO gets their $15 million or whatever that pay is, probably something like that. I’m not pulling it out of the air.
The point in putting in these restrictions, having a special Inspector General, was to try to make sure that as much as possible the money went to the workers. This is something, when Trump made a signing statement that he’s not going to cooperate, this was not a surprise. I mean, it was one of these things like, it was the least surprising thing I’ve probably seen in the last five years. He’s been spitting in the face of Congress for the last three years. How could they possibly think he was going to suddenly become a good citizen and cooperate with Congress?
I mean in a certain sense, I was glad he had this signing statement, because I was literally joking. I go, “How long after Congress passes this bill? Will it be before Trump and Mnuchin, in the Treasury Secretary, tell Congress to get lost?” Well, answer, as soon as they passed it. So nothing to argue about. It was not the least bit surprising. Many of us were yelling, you have to put anything in here, any bailout money has to be absolutely locked down. Here’s what it’s for. It can only be used for this. You go to jail if you use it for anything else. And they didn’t do that. And surprise, surprise, surprise. Donald Trump’s not cooperating.
Mark Steiner: I’m curious. You’ve been working at this for so long now. I’m just curious, your analysis of what could have been done instead? What could Democrats and others in opposition in Congress have done, and where does that lead us? Because it’s really easy to say, “Look. You shouldn’t be attacking me.”, says Donald Trump or any of the people around him, “Because we’re trying to fight this coronavirus, and you’re getting in our way of rebuilding the economy.” I mean, they have a really strong kind of PR point.
Dean Baker: Well-
Mark Steiner: Go ahead. Yeah.
Dean Baker: They have a strong PR point, because the Democrats are just… It’s joking. It’s like, it’s easy to win a football game if the other team doesn’t show up. The Democrats could have written this so that money went to workers. In Denmark and the U.K. I suspect in other countries as well, I know those two. The government is basically paying companies to pay their workers. They’ll pay Denmark’s case, 75%. U.K., I think it’s 80%. I mean, we want most of it. We could fight over the exact amount, but the money is paid to the companies to pay to their workers. Again, that’s very clear. So they could have done something along those lines. That was not done here.
Also, I don’t want to go into great length all the problems with this bailout a bill, but an obvious one is just that it doesn’t give anywhere near enough money to sustain local governments, who are seeing their revenue streams just totally collapse. There’s no sales tax revenue, income tax revenue. It’s plummeting. At the same time, demands for their services, particularly healthcare services, are growing through the roof. So there is money there. I think it was $175 billion, but that’s going to be nowhere near enough. They’ll probably need at least twice that to cover the hit to their economies.
Mark Steiner: Where do you think this kind of political economic struggle might go? I mean, it… I’m sorry. Go ahead.
Dean Baker: It would really depend on the ability of the Democrats to make hay of this. Again, it shouldn’t have been a surprise that the Trump administration didn’t cooperate. They can go the other way. For example, what basically Trump has been saying throughout his administration, they don’t have any obligation to cooperate with Congress. And the courts play footsie. Yeah, we’ll decide this in five years when it’s moot.
But what they can do is, they could subpoena. They can get Boeing’s CEO, and they say, “Hey, we want to know exactly what you did.” So they can go the other way. But it really does require the Democrats to be aggressive and challenging priorities here. And while many Democrats, we know Bernie Sanders, Alexandria Ocasio-Cortez… There are certainly progressive Democrats, Elizabeth Warren. Obviously, it’s a long list that might be prepared to do that. I worry very much. You have many in the more center swing of the party who don’t really mind seeing a lot of money going to Boeing with fewer, no strings attached.
But that’s really what the battle is going to be. Are you going to be able to challenge Trump on misusing public money? And of course, on larger crisis, it’s I have to say… I mean I’ve been following this fairly closely as I’m sure many people have, but it’s all we can do right now.
This is a disaster, and it’s Trump’s fault. And the idea that he would get up there and say we’re doing a great job, this is like the captain of the Titanic going, “Oh, yeah. Sure, the ship sank and however many people died. But we did get a lot of people off on lifeboats.” I mean, yeah. Good, you got them off on lifeboats, but it was your fault those people died. And that’s the story here with Donald Trump. So it’s good that he’s finally organized his task force, and they are doing some things to counter. That’s what they’re there for, that’s what the federal government exists for. But they’ve done an absolutely horrible job, and many more people are going to get sick and die because of his failures. And of course the economic consequences as we see, are enormous.
Mark Steiner: Maybe think of the… is, include this. What this might mean in a larger, broader sense longterm. I mean, the pandemic, you’re right. The United States had not jumped into a quickly enough to do the right things to ensure it didn’t spread the way it’s spreading at this moment. And then on the other hand, we look at the economy. In the American mindset and the press especially, when people think of the economy, they think of the stock market. They think of the larger GDP and not about workers’ lives and what happens in their lives, small businesses. How are we keep the economy floating and alive? I think that’s what’s missing here. There can be a double disaster, because it could be a health disaster. It also could kind of unfold into an economic disaster.
Dean Baker: Yeah. Well, a few things there. I mean, first off, this shows very much the problems with our healthcare system. I mean, first and foremost of course, this is a problem of failing to take the pandemic seriously. Which we did have people, certainly in the Obama administration, that that was their job to be on the lookout for pandemics. Trump has been saying no one could know. Well no, actually, people did know. You fired them. That has to be… everyone has to understand. Reasonably, we have this massive crisis here.
Trump fired the people whose job was to prevent this crisis. Yes, people did know. When he says no one could have known, he means, “I did know.” I, meaning, Donald Trump. The United States differs from basically every other wealthy country, in that people here don’t have insurance. Or if they do have insurance, they often have expensive copays. And that’s different than France, Canada, pick your country. Where they don’t have to worry that if they go to the hospital and get testing, they can’t afford the test or they can’t afford the treatment if they turn out positive. That’s at least not an issue for people everywhere else. That’s a really big deal.
Again, your point about the stock market. The stock market, it’s not that it’s an incomplete measure of society’s wellbeing. It’s not a measure at all. The stock market, this is economic orthodoxy. The stock market in principle is a measure of future corporate profits, and anything that increases corporate profits or is expected to increase corporate profits, should make the stock market go up. So when you have Donald Trump give a big corporate tax cut, well, that means future after-tax profits will be considerably higher. And that should make the stock market go up, which of course, it did. It doesn’t mean we’re better off. It just means that companies are going to have higher profits.
This idea that somehow we get a measure of the economy or people’s wellbeing by looking at the stock market, it’s not telling us that at all. I mean, it’s like looking at a baseball score and going, “Oh, the Yankees got 18 runs yesterday. Everyone’s doing real well.” Well, that doesn’t make any sense. And seeing the stock market go up doesn’t mean everyone’s doing well, and seeing it go down doesn’t mean we’re doing poorly.
Mark Steiner: Very quickly here at the end, tell us what would be a progressive alternative to what we are seeing happening now when it comes to dealing with this Covid-19, from the economic perspective? What could be proffered? There’s not being proffered?
Dean Baker: Well, a few things. As I said before, the key issue is keeping people employed. That’s got to be front and center. Secondly, dealing with healthcare. That is the problem right now. So making sure… One, that the people on the front lines, the providers, the doctors, the nurses, that they have the protective gear, the ventilators, the basic medical equipment. Also, we probably need more medical staff. I think it’s been kind of a tragedy. No one’s taken steps. We can’t train someone to be a nurse or doctor in two weeks. We could train someone to do basic tasks like changing bed and cleaning surfaces. We have people who are exhausted there. That seems to me, that would have been a really good thing to do.
And third point I’ll make, and I’m seeing some of this, and I think it’s just an incredible model. You’re seeing people around the world doing things like designing ventilators that they could make from simple materials, and they’re cheap and they’re putting it up on the web. We’re seeing advances on treatments and on vaccines that people are open sourcing. Incredibly important. Because the reason drugs and medical equipment are expensive, is because we have patent monopolies. If we open source this, we would both see quicker developments, because everyone would be sharing everything. And then when they did have a new ventilator, we did have a new drug in the public domain, they’d be cheap. I often say this, that drugs are cheap. People look at me like I’m a lunatic. The point is, they’re cheap to manufacture, cheap to distribute. We make them expensive by giving patent monopolies. That’s an incredibly foolish way to finance the research. So if we can make progress in that out of this disaster, that would be a really, really great thing.
Mark Steiner: Dean Baker, I appreciate the work you’ve done over the years. And joining us today, bringing us some light onto this for people to kind of wrestle with. We’ll stay on top of all this together, and I appreciate you taking the time on The Real News.
Dean Baker: Thanks for having me on, and stay safe there.
Mark Steiner: You, too. Always a pleasure to have you with us. And I’m Mark Steiner here for The Real News Network. Let us know what you think. Give us some ideas as well. Take care.
Dean Baker is co-director of the Centre for Economic and Policy Research