By James Kwak
The airline industry is trying to hold up the federal government for $29 billion in grants and another $29 billion in loans. They threaten that if they don’t get the grants they will lay off employees, and that if they don’t get the loans they will use their remaining cash on dividends and stock buybacks.
First of all, the second threat is staggering in its audacity. At current course and speed, the airlines will go bankrupt. When you are in financial distress, the last thing you should do is take your scarce cash and hand it to your shareholders. That meets at least the spirit, and perhaps the letter, of a fraudulent conveyance in bankruptcy law. But it represents the pinnacle of the idea of shareholder capitalism: screw the workers, screw the creditors, just take the money and run.
More importantly: the federal government should not give the airline industry a single penny either in grant aid or in sweetheart loans. I understand the economic challenges here. Thousands of workers are at risk of losing their jobs and not being to pay for food or rent in the midst of the greatest crisis of our lifetimes. To the extent we want to help them, the top priority is to give money directly to them.
The Baseline Scenario 