In the October 2nd, 2020 post on David Stockman’s Contra Corner, which is a recommended financial newsletter on this blog, David Stockman talked about an advertisement put out by the airlines industry that 50,000 employees would be laid off if the United States. Government did not give them yet another taxpayer-funded bailout. Stockman is a former Congressman of Michigan’s 4th district, as well as the former director of the budget office under former U.S. President Ronald Reagan, which gives Stockman credibility on this, and many other issues related to banking, finance, and the economy.
This timing is by no means a coincidence, and here’s why; when the CARES Act was signed, the airline industries received $50 billion (yes billion with a “b”) to cover 75% of payroll expenses on the condition that no employees would be fired BEFORE October 1st. Now that October 1st has passed by a couple days as of the writing of this post, the airlines are now demanding more money, using threats and extortion to get even more money stolen from unwitting taxpayers.
Pay us billions of stolen taxpayer money or we’ll fire our workers, the airlines demand. Talk about exploitation of workers! To think that capitalism exploits workers, even when capitalism is the only reason workers can exist; after all, if no capitalists existed, where would the money to take risks to make investments into companies that create jobs originate? It isn’t capitalism that exploits workers, it is socialism that does that, except socialism not only exploits the workers, it exploits the voters, who number in the millions, too.
In the example of this post, the government is stealing from one social class, the hapless voters, and transferring the stolen money to another class, the airline industry; this has already happened with the CARES Act and the airline industry is attempting to do it again. Furthermore, the airline industry is extorting the government by threatening massive layoffs. Additionally, the bailout money, such as that disbursed from the CARES Act, is funded by taxation and Federal Reserve Notes printed out of thin air; these are the most egregious forms of theft. So, on top of extortion, the airlines are now trying to commit theft, yet again, on a humongous scale. Because the government is the object of the exploitation, the airline industry is also effectively exploiting democracy, which is the will of the voters. Therefore, as demonstrated in this all too real example, socialism is what exploits the workers, as well as countless voters, not capitalism, contrary to what Karl Marx, most followers of his philosophy, and advocates of socialism tend to believe and preach.
On top of the ethical considerations, the financial considerations also don’t warrant or justify any bailout of the airlines industry. As Stockman also explains,
American Airlines CEO Doug Parker confirmed late Wednesday that his airline would go ahead with 19,000 layoffs — or 14 percent of its pre-pandemic workforce — but said it would “reverse” them if an agreement were reached.
“Tomorrow, we will begin the difficult process of furloughing 19,000 of our hardworking and dedicated colleagues,” Parker wrote in a memo to staff members. “I am extremely sorry we have reached this outcome. It is not what you all deserve.”
United Airlines confirmed that it will cut thousands of jobs, telling employees in a letter: “We regrettably are forced to move forward with the process of involuntarily furloughing about 13,000 of our United team members. We implore our elected leaders to reach a compromise, get a deal done now, and save jobs.”
Stockman then explains how the vast majority of bailout money will be used by the airlines not for productive investments, but for financial purposes like stock buybacks and dividends, neither of which benefit the workers or most people. Stockman puts all of it into perspective by explaining:
- During 2014-2019, in fact, the big four airlines—American, United, Delta and Southwest— collectively paid out $44.5 billion in stock buybacks and another $6.5 billion in dividends. Yet they did not have enough free cash flow to cover this $51.0 billion outflow to Wall Street, and not by a long shot.
- However, combined free cash flow of the Big Four amounted to just $36.9 billion during the six year period, meaning they went in the hole to the tune of $14 billion to pleasure shareholders.
- Not that Wall Street cared, of course. Between the end of 2013 and the pre-Covid peak in February 2020, the combined market cap of the four airlines soared from $110 billion to $220 billion. And since the airline stocks are the quintessential trading sardines—even the blue-haired ladies and bank trust departments avoid them—it was the fast money speculators who pocketed most of the $110 billion gain.
- Only when the Covid and lockdowns struck did Wall Street banks, apparently, ask how the industry pumped 138% of its operating free cash flow into buybacks and dividends. But thanks to the Federal Reserve injections of inflation, that was actually easy-peasy.
- That is, at the end of 2013 the Big Four had net debt of $22 billion among them, which figure had ballooned to $66.5 billion by the end of Q1 2020.
Wow; the airlines have the audacity to demand even more money, especially through the unethical means of extortion! We should all hope and pray that the government doesn’t enable the corporatist sleazy airline industry to get away with exploitation of workers and taxpayers. However, the probability that the government will do the right thing by refraining from any further bailout is even less than that of my dog learning to speak Russian. When posterity asks our current generation how we could allow such theft, extortion, and socialism, how good will our answers be?
Source: Liberty Forecast Blog