Coronavirus Bailouts Will Cost Taxpayer Hundreds of Billions of Dollars

The U.S. has already pledged almost $3 trillion to save Americans and the economy from the coronavirus pandemic. About 60% of the money for businesses large and small and direct payments to people are in the form of grants, which are funds that will not be recovered by taxpayers. Scott Newsome, PhD candidate at the University of California Santa Cruz, joins us for how the coronavirus bailout will cost us hundreds of billions of dollars.

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Episode Transcript

Speaker 1 (00:00):
It's Wednesday, Ape. I'm Oscar Ramirez from the Daily Dive
podcast in Los Angeles, and this is your daily coronavirus update.
The US has already pledged almost three trillion dollars to
save Americans and the economy from the coronavirus pandemic. About
six of the money for businesses large and small and
direct payments to people are in the form of grants,

(00:21):
which are funds that will not be recovered by taxpayers.
Scott Newsome, PhD, candidate at the University of California, Santa Cruz,
joins us for how the coronavirus bailout will cost US
hundreds of billions of dollars. Thanks for joining us, Scott,
Thanks for having me on. We wanted to talk about
all the money that is going into the stimulus packages

(00:42):
that the US government is going through right now during
the coronavirus recession. We've pledged almost three trillion dollars to
save the economy and Americans from what's going on. The
interesting thing is that this is gonna cost taxpayers hundreds
of billions of dollars. We've gone through this before in
the past, other bailouts. Everybody remembers two thousand eight and

(01:03):
all the industries that we bailed out then. But this
is a little different because a lot of those actually
made money or at least broke even in this case,
a lot of this is taking the form of grants,
so we're not going to recover a lot of this money.
So Scott tell us a little bit about this. The
term ballouts are different than the past ballouts and the
fact that they're going to cost a lot of money,

(01:23):
hundreds of billions of dollars. My research shows that at
least over the past, with the years of vast majority
of built ballots have actually made money or turned to profit.
Where this bailout was going to cause taxpayers right now, estimated,
if you count in the fourth law that was just
signed into law, will cause taxpayers around about six or
fifty nine billion dollars over ten years. Let's start off

(01:45):
with our lessons from the past and some of the
bailouts that we've done before. Let's talk about the ones
that have given us a profit. One in particular, as
I mentioned back to two thousand eight, we pledge trillions
of dollars that save the financial system. Everybody remembers TARP,
the troubled Asset relief program things like that. Those actually
made some money. I think we made from your reporting

(02:05):
thirty two point five billion dollars. Off of that, taxpayers
earned about thirty two point five billion dollars. Offer of
the money that was dispersedly to help the financial sector,
and everybody remembers it was seven billion dollars, but only
a course of those funds were actually dispersed to Wall
Street firms like City Group, JP Morgan, and ai G
and in exchange for that help, Wall Street firms gave

(02:26):
the federal government preferred stock options and other forms of
compensation to payback taxpayers for this help. The other one
that everybody kind of remembers, you always hear Fannie May
and Freddie mac. That one taxpayers got their money back
as well. Taxpayers got their money back and got a
very large profit from that. The US government, just adjusting
for inflation, invested in Fannie May and Freddie MCT around

(02:47):
two or thirty four billion dollars. So far up to
this year, they have received back that money, plus an
additional hundred twenty three billion dollars in profits. Not continuing
to go on as we speak of, the US government
still holds certain positions in Fanny May trainmag and are
still receiving dividends for the money they invested. So these
were all structured in this way. Obviously, as you mentioned

(03:07):
some preferred stock options, other compensation, we were always planning
to get some of that money back, and you know,
early on the concerns are obviously, well, we're putting a
ton of money up front. We don't know what we're
going to get back or how much, or what it's
gonna look like at the end when it all shakes out.
But we did make money back on those things. There's
been some other ones, railroad industry bailouts and other airline

(03:28):
bailouts that we really didn't make money back. Some of
them weren't designed to do that per se. But these
coronavirus bailouts, we're not gonna be seeing any of this.
It's kind of this weird situation because we're bailing out
these companies, these small businesses, bigger businesses, whatever it is.
But this is just to keep us afloat. This is
kind of not any singular industry almost, it's kind of

(03:49):
everybody all at once. That's what makes these bailouts too
also very different than previous bailouts over the past fifty years.
As this bailout is focused on saving the economy and
basically just keeping the economy of float, keeping big businesses
float along with small businesses a float. Previous recessions or
previous bailouts of the perred US government has normally, you know,

(04:10):
built out an industry, say with industries such as the
railroad industry, or the airline industry, or specific company like
Chrysler or GM or Blackheed Martin. So going back to
what we're doing right now, you know, these small businesses,
they're not going to have to pay any of this
back under the Payroll Protection program as long as they're
keeping workers on their payrolls. At least smaller airlines might

(04:31):
not have to pay some of this stuff back, while
larger airlines are expected to. And beyond that, even big
corporations are all rolled into all this. Small businesses, as
long as they keep workers on the payroll, will not
have to pay back most of the assistance they've received
under the Payroll Protection program. There's also other money that
small businesses are getting for economic injury disaster grants and
kind of debt forgiveness for other loans they've taken up

(04:53):
with a small business administration that's going to end up
causing taxpayers money that's given the small businesses. The airline
industry is well, as you said, is received six and
them billion dollars so far, and small passenger airlines will
not repay that assistance, while large airlines are expected to,
and even big corporations and state and local governments are
broken into this, so it looks like big corporations and

(05:15):
state and local governments will have to repay the aid
that they receive. So far. Congresses set aside fifty four
billion dollars for large corporations and states and local governments,
and about a hundred ninety five billion dollars of that
money has been invested by the Treasury into various federal
reserve programs. In return, taxpayers will get probably interest and
possibly equity stakes and returned to that money at the end.

(05:36):
What does this look like? I mean, obviously we're just
going to be adding a ton of money to the
national debt, but beyond that, how do we pinch our pennies?
After this? There will probably be some form of a
cutback I'm sure down the road eventually from all of
the spending. But at the end of the day, when
millions of jobs and millions of small businesses are at stake,
I think Congress is wanted to rescue the economy. Scott

(05:59):
new Some, PhD, Candidate for Politics at the University of California,
Santa Cruz. Thank you very much for joining us. Thank
you for having me on. I'm Oscar Ramirez and this
has been your daily coronavirus update. You don't forget that.
For today's big news stories, you can check me out
on the Daily Dive podcast every Monday through Friday. So
follow us on I Heart Radio or wherever you get

(06:21):
your podcast.