Posted on 05/25/2020 1:34:50 PM PDT by Kaslin
People are becoming outraged upon discovering the types of businesses and organizations that are receiving COVID-19 bailouts through the CARES Act and subsequent legislation. Left-leaning media outlets are receiving millions of dollars. The Kennedy Center for the Performing Arts in Washington was given $25 million. Elite universities like Harvard got the bailout money. After public outcry, Harvard, Stanford and a few of the other universities returned the money. Even the Los Angeles Lakers received millions, but they also returned it. Planned Parenthood affiliates improperly received $80 million and now the government wants it back.
There’s another category of businesses receiving bailouts that are questionable. That is government contractors. Since they have regular government business, they’re not getting hit as hard as others. In the last year, the top 20 defense contractors received $200 billion in contracts. Additionally, defense contractors were allowed to keep their employees working. The Aerospace Industries Association convinced the Pentagon to declare them “Essential Critical Infrastructure Workforce” and therefore “expected to maintain their normal work schedules.”
Boeing has contemplated taking a bailout. But the company was just awarded a $128.5 million dollar modification to its Ground-based Midcourse Defense development and sustainment contract earlier this month. And on April 2, Boeing entered into an agreement with the Air Force to receive $882 million in funding for a fleet of KC-46 refueling planes. The Air Force admitted through a spokesperson, Ann Stefanek, that it was part of an effort to “to maximize cash flow, where prudent, to combat coronavirus impacts on the industry base.” Dan Grazier of the Project on Government Oversight said “Boeing has definitely come out ahead in all of this.”
Yet, Boeing still asked for $60 billion dollars to bail out the aerospace manufacturing industry. Nikki Haley famously resigned from the board of Boeing over it. So far, the company hasn’t accepted any of the $17 billion bailout that ended up being awarded for the industry, because the government said it would come with partial government ownership. CEO David Calhoun admitted Boeing could get the money from the private sector instead.
The airline industry has been drastically affected, making it more difficult to buy planes from Boeing. But the government bailed out the airline industry with $50 billion. Most of it, 70 percent, does not have to be repaid.
Boeing isn’t “too big to fail.” In contrast, the banks that received bailouts in the 2008-09 financial crash were part of the backbone of business; they lend, which is necessary so businesses can pay workers, finance inventory, build facilities, and invest in new technologies. Without them, the whole economy comes crashing down. Not that bailing them out was the only option — plenty of experts disagreed. However, they are more fundamental to the economy than Boeing. Boeing doesn’t lend. Worst case scenario, like GM, Boeing could go bankrupt and restructure its debt under Chapter 11. Its suppliers would still get paid and it could still make planes.
The federal government is making adjustments to contracts in order to get money to these companies faster. Shay Assad, a former senior Pentagon official, doesn’t even think this is necessary. He called it a “taxpayer ripoff” since the industry has the ability to borrow money at very low interest rates.
There are plenty of familiar names on the list of the federal government’s top 100 contractors. They include AT&T, MIT, IBM, Pfizer, FedEx and Honeywell. And these are just the biggest ones. There are thousands of businesses with government contracts. Careful consideration needs to be given to providing stimulus funds to these corporations. It’s not clear whether any of the top 100 have received bailout funds, since the full list hasn’t been released yet.
The Coronavirus Stimulus Package contains $2.2 trillion. Note that’s trillion, not billion. Now is not the time to be throwing extra money at corporations that have stable income already coming in through government contracts. Yet $425 billion has been designated to go to large corporations.
It’s true that companies like Boeing are important to national defense. But their CEO said they’re better suited to getting money from the private sector. They have now raised $25 million from private lenders in a bond sale. If Boeing can survive without government assistance, many of these other large government contractors can too.
This is one area where Republicans and Democrats can agree. While this economic crisis is different from others in that government deliberately caused much of it in order to contain COVID-19, bailout help must be prioritized. Large corporations with a steady stream of income from government contracts that are already being sped up to combat the crisis should not be treated the same as small businesses that have no safety net.
To SMALL, critical subcontractors only.
To SMALL, critical subcontractors only.
I’m a Defense contractor and for those still working, I say absolutely NOT.
Boeing is a huge company. It would still be large if it shut down its commercial side...but that would be thousands of jobs lost.
The problem with bailouts is the government gets into the game of picking winners. I am pretty sure that was not what the founders wanted.
Government contracts are not about procuring weapons that we need. They are about sending money to important contractors who lobby for it. It is important to keep the technology base alive. But government contracts are much more about politics than defense. If a contract makes our defense stronger it’s just a happy coincidence. (I was in the business for 30 years.)
Wow. Government money being thrown around like trash. Who would have thought such a thing would happen? Other than what most of the history of the world has shown happens over and over again, who knew? /s
Depends. Some contractors are small business owners
Nah, I’m DOD, the best workers go Contractor for a larger pay check... They take their chances, they get the rewards/losses...
Agree. My BIL asked me to help set up his business in 2000 or so. I convinced him his only way to compete with 8A types was as a disabled Vet. He sold for over 8 million this year. He never needed any handout. Hell a BSAE, MSAE,and PHD Eng Mgmt. is over my head.
Nope.
It is disgusting to do what Belowski the idiot did.
It's not just a matter of the personality involved. Milton Friedman came up with this diagram that shows why Government money is so often wasted. By it's very nature Government spending falls into the worst category shown.
Considering how DC actually works, large contractors buy the Federal contracts buy kicking back money to those politicians who support and grant them the contracts. For the DC politician’s own personal gain, it is paramount for them to keep those contractors in business and viable, thus huge federal handouts go to their cronies. That’s just how business is done in DC! Sounds like organized crime doesn’t it?
Government caused problems with government demanding it has the only solution.
The perfect self-licking ice cream cone.
JoMa
What is to be done when the Government gives direction that is beyond the scope or change the directions for a contract?
Who says that half time is out of scope? Having been involved in government contracting, you will be amazed at what unilateral actions can be done by the government in many contracts that the company agreed to as part of accepting/winning the contract.
JoMa
And the US armed forces rely on these smallish military contractors to keep the armed forces' legacy hardware going. If those contractors aren't kept alive, the military's readiness will crash and its budget will have to be dramatically increased.
OTOH, Boeing is a gargantuan contractor to the US government, chiefly the military, and Boeing has been so mismanaged in manufacture of both its civilian and military products that it rightfully deserves to go out of business. Its government contracts could probably be spun off to a smailler new military contractor-only company, but there would be a lot of disruption.
There simply is no easy answer to this.
No. There should be no “bailouts.” almost everything about reactions to and treatment of this Panicdemic is unConstitutional. We will not get our Constitution back, no matter what transpires hereafter. The left has tasted the power of ignoring especially the Bill of Rights and Due Process. The transgressions cannot be undone and are strong signals of what is to come.
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