CEOs, not the unemployed, are America's real 'moral hazard'

[nitpicker]

https://www.theguardian.com/commentisfree/2020/apr/18/coronavirus-stimulus-checks-unemployment-benefits

CEOs, not the unemployed, are America's real 'moral hazard'

Robert Reich

Sun 19 Apr 2020 06.00 BST Last modified on Sun 19 Apr 2020 06.04 BST

The coronavirus relief enacted by Congress is barely reaching Americans in need.

This week, checks of up to $1,200 are being delivered through direct-deposit filings with the Internal Revenue Service. But low-income people who have not directly deposited their taxes won’t get them for weeks or months. Worse yet, the US treasury is allowing banks to seize payments to satisfy outstanding debts.

Meanwhile, most of the promised $600 weekly extra unemployment benefits remain stuck in offices now overwhelmed with claims.

None of this seems to bother conservative Republicans, who believe all such relief creates what’s called “moral hazard” – the risk that government benefits will allow people to slack off.
(snip)

When it comes to big corporations and their CEOs, however, conservatives don’t worry about moral hazard. They should.

Before the coronavirus outbreak, corporations were borrowing money like mad, capitalizing on the Fed’s bargain-basement interest rates. Total business debt topped $16tn last year.

Corporations used much of this debt to buy back their own shares of stock. This raised the earnings of each remaining share, creating a bonanza for big investors and top executives.
(snip)

American corporations spent $730bn on buybacks last year and more than $370bn this year before the virus, much of it financed by debt. If they hadn’t frittered away that trillion or so dollars, they’d be better able to cope with this emergency.
(snip)

No worries. Government is bailing them out, just as it did the Wall Street banks that exploded in 2008.
(snip)

[Igel]

1. Reich knows better.

A few years ago all the moral outrage was directed at corporations that had hundreds of billions if not trillions of dollars in liquid assets sitting around. Give it out in dividends? Better than sitting on it. Even better, increase overhead, capacity, invest in plants and people.

Reich was in the mob calling for that. It's immoral to sit on piles of cash.

Now the moral outrage is that the corporations didn't sit on giant stashes of cash and liquid assets, Reich is in that mob. What was moral is now immoral, what was immoral is now moral. And, of course, he's always and always has been on the side of morality. Whatever that may be today. But, of course, he never changes his views.

Companies acted sometimes foolishly in taking out low-cost debt to buy back stock--there are good reasons to reduce the shares of stock out there, so it's not always a foolish thing. In hindsight--but only in hindsight--they acted foolishly in not sitting on the piles of cash.

However, they not only weren't the only fools who thought sitting on cash long-term was a bad idea, they weren't among the judgmental fools who insisted it was an immoral idea.