Dem
47
GOP
53
We are hardly experts in macroeconomics, so we don't claim to know all the nuances and subtleties of government bailouts of private concerns. But we do think those bailouts make sense sometimes. For example, the Troubled Asset Relief Program, which was passed under George W. Bush and largely implemented under Barack Obama, injected about half a trillion dollars into troubled financial companies and automakers. The money was largely paid back, such that the total cost to the federal government ended up being $31 billion (or, about two weeks of warring in Iran). We are willing to believe that the economic damage that would have been done, but for the TARP bailout, would have exceeded $31 billion, perhaps by several orders of magnitude. Though again, not our area, so we are happy to be corrected by any readers who know better, at comments@electoral-vote.com.
We are much less persuaded that a bailout makes sense in the case of an airline, like Spirit Airlines, which is in deep trouble right now. To start with, Spirit is in a cutthroat industry (airlines) and a particularly cutthroat sector of that industry (bargain carriers). There's no reason to believe that an infusion of cash will save it; it's more likely to just postpone the inevitable. There are also many other airlines that can pick up the slack, whereas with, say, auto makers, that is much less true. Spirit is also not essential to national defense, or to the national economy, or to any particular state or local economy. By contrast, if the banks go under, the U.S. and New York City will suffer badly, and if the auto makers go under, Detroit will be in trouble.
What definitely does not make sense is for the government to buy Spirit Airlines. That has "disaster" written all over it. And yet, that is what the Trump administration is thinking about doing. Earlier this week, Trump announced that the airline could receive up to $500 million in federal money, and in turn the federal government would own up to 90% of the airline. The alleged long-term plan would be to make the money back by selling Spirit to some other owner, at a hefty profit.
We almost cannot count the ways this just does not work. The government does not know how to run an airline. It could ask for help from the professionals at Spirit, but... they apparently don't know how to run an airline, either. The only thing the government could do is give Spirit some sort of favored treatment, like tax breaks or looser regulations. But that, of course, would be terribly unfair to the other airlines who have to play by the actual rules. And if the government can't right the ship (well, the airplane), then there goes $500 million of the people's money.
And then, consider the notion that the government is going to flip Spirit for a profit. If it was actually worth $500 million (or $555.5 million, as the 90% valuation implies), the airline would not be coming to the government for a handout; it would be talking to some private concern. How is the government going to get the value up to $555 million (or more)? The only way to make a profit is to "sell" the airline to, say, Qatar Airways for $1 billion or $2 billion or $10 billion. In other words, it could be a gateway for a big-time foreign bribe, one that could put Qatar Force One to shame.
And speaking of handouts, where does it stop? The other major players in the cut-rate American airline space, namely Frontier and JetBlue, are in trouble right now, too. And the situation is made worse by rising fuel costs, caused by the Iran War. So, if Spirit gets to sell itself to the government at a markup, Frontier and JetBlue are likely to want the same deal. And if those two are successful, there will be dozens of others who decide the federal government is their insurance policy. It's a real Pandora's Box.
Then there's the hypocrisy of the fact that government ownership of airlines is socialism, and is bordering on communism. This from a president that has made many attacks on "evil socialists" like Zohran Mamdani, Rep. Alexandria Ocasio-Cortez (D-NY) and Sen. Bernie Sanders (I-VT). Even those nations that DID embrace socialized air travel largely do not have government-owned airlines. They just grant a monopoly to a government-sanctioned private carrier.
We'll point out one more thing (and do appreciate that keeping it to just five things requires much restraint). This is an administration that just loves to round up alleged undocumented immigrants, and to ship them off to some random foreign country without benefit of any sort of legal process. One of the big hitches has been finding air carriers willing to do the dirty work. Well, if the government owns its own air carrier, that problem goes away, now doesn't it?
To their credit, some of the Republican members of Congress who are only pretending to be MAGA have screamed bloody murder about Trump's plans, with Sen. Ted Cruz (R-TX) perhaps screaming the loudest (albeit while also claiming that this is really Joe Biden's fault, because the Biden administration blocked a merger between Spirit and JetBlue). Sometimes, Trump listens to the screaming. Sometimes, he doesn't. Here, we think he'll have a very difficult time giving up the idea of a fleet of planes at his disposal, for any use he sees fit. (Z)