“Stock Market,” Piotr.

October 5, 2020; Washington Post

Cui bono?

Who benefits? It’s the first question of politics.

A Washington Post article by Peter Whoriskey, Douglas MacMillan, and Jonathan O’Connell, based on data from the Committee for a Responsible Federal Budget, seeks to answer that question. The answer: a large portion, as much as half, of coronavirus relief money has gone to millionaires and large corporations rather than working people or small businesses.

In broad terms, an estimated $4 trillion has been authorized in federal dollars. A rough breakdown follows.

  • Aid to business: $2.3 trillion (56 percent)
  • Payments to people (unemployment insurance, stimulus): $884 billion (22 percent)
  • Health: $638 billion (16 percent)
  • State governments and other public agencies: $253 billion (6 percent)
  • Total: $4.075 trillion

Readers may notice that the $4.075 trillion is about $1 trillion more than was directly legislated by Congress. This occurs because of tax code provisions or formula-based increases in expenditures. For instance, the federal government matches state Medicaid payments, so if state payments increase, so do federal payments.

One critical observation made by the Post is that subsidies to business were often not tied to employment. In the past, at NPQ we covered the job impact of the Paycheck Protection Program (PPP). As we noted, the job preservation impact was modest—at best, 3.2 million jobs. But at least the PPP program, which ultimately cost about $517 billion, protected some jobs and provided a source of needed capital for many small businesses and nonprofits.

Other large programs brought fewer benefits. For instance, the Post writers note that $651 billion in tax breaks “often went to companies that laid off workers. The Cheesecake Factory, for example, furloughed 41,000 people, and said it will claim a tax break worth $50 million.” They add that an additional “$454 billion went to the Federal Reserve to help stabilize markets, and those efforts enabled many companies, including Wells Fargo, AT&T and Carnival, to borrow at lower rates even while laying off employees.”

One graphic in the article compared the impact of tax breaks to large businesses with the stimulus checks received by working families. The results are not pretty:

Stimulus payments

159 million American families with income below $150,000 received an average benefit of $1,679 costing the U.S. a total of $267 billion

Tax breaks for business owners

43,000 Americans with income above $1 million received an average benefit of $1.6 million costing the U.S. a total of $135 billion

While a database exists for PPP payments, a similar database does not exist for the programs benefitting larger businesses. But many companies have cited the money they received in statements to shareholders.

Some examples:

  • Manulife, a Canadian insurance giant with $20 billion in cash reserves, said that it is eligible for a $54 million tax refund under the new law.
  • Owens & Minor, a medical equipment maker, plans to claim $13 million, even as its stock has soared due to rising demand for personal protective gear.
  • Organic grocery distributor United Natural Foods, where revenue jumped by $1 billion during the pandemic, applied to receive a $28 million tax refund.

In August, the CEO of home insurer Assurant told investors that the company was doing well enough that it made sense to reward shareholders, with investors receiving $160 million in buybacks and dividends. Assurant’s CARES Act tax refund was $205 million, fulling paying for the expense.

Boeing, which laid off 19,000 employees this year, said on a July earnings call that its CARES Act tax refund would help it pay for the severance packages to departing workers.

Other companies have used a Federal Reserve program that has helped lower interest rates for corporate debt has led to record corporate bond sales. Among those issuing these bonds: Procter & Gamble $5 billion, Coca-Cola $6.5 billion, Apple $8.5 billion, AT&T $12 billion, and Oracle $20 billion. Reportedly of the 34 companies that offered the largest corporate bond issues between March and August, one-in-three have had or announced layoffs; for instance, AT&T laid off thousands in June.

Meanwhile, as we have noted many times at NPQ, basic benefits for working people, such as rent relief to stay in homes or supplemental unemployment insurance payments, are allowed to lapse. Just this past week a program that had at least protected the employment of an estimated 750,000 workers in the airline industry was also allowed to the lapse.

As the Post analysis makes clear, the money is there. The failure to meet those needs, in short, is purely political.—Steve Dubb