Coronavirus Responses Reflect a Range of Values
8/3/20
Regardless of the outcome of negotiations between Democrats and Republicans on the next round of Coronavirus aid, the gulf between their respective starting positions reflects a sharp contrast in values. First and foremost, the two packages are dramatically different in terms of scale: The combined dollar amount of the Republican proposal reaches only $1.1 trillion, while the Democratic proposal comes to $3.4 tillion or three times as much. These respective totals reveal the comparative senses as to the state of our economy. The Democrats clearly assess the current state of the economy as being much more precarious than do the Republicans.
Beyond that, among the more significant financial differences are the following:
1. Democrats would continue unemployment supplemental benefits at a level of $600 per week; the Republicans would reduce it to $200 with a plan to transition to a level capped at 70% of workers’ prior incomes.
2. Democrats want to direct $1 trillion to state and local governments; Republicans want to spend only $105 billion to this sector, specifically restricted to support education.
3. Both parties want another round of support for households and individuals. Republicans want to repeat the same levels of expenditures as the first-round distributions; Democrats want to increase the allowance for children and extend the benefits to all taxpaying individuals/families, including undocumented workers.
4. Republicans want $400 billion in support for businesses, inclusive of business tax breaks; Democrats provide for $36 billion in business tax breaks.
These value differences confound me. As I consider these issues, I can’t help but recognize the stark difference in today’s America between the haves and the have nots. For those Americans who have the good fortune of being able to maintain their employment and income, life may be proceeding with Covid-related inconveniences; but for the most part, these inconveniences pale in comparison to the dire situations faced the millions no longer receiving a paycheck. It astounds me that Republicans can deem it appropriate and timely to cut back on this type of support now, with what we know about the current, high rates of Covid cases, hospitalizations and deaths.
In the same vein, I’m perplexed by the Republican position that effectively ignores the plight of state and local governments. These entities provide our most essential services (fire protection, police, ambulances, education, transportation and sanitation services). Without federal spending in support of this sector, we’re facing not only cutbacks in critical services, but we’re also inevitably going to see a large wave of unemployment claims coming from furloughed state and local government workers.
Meanwhile, while congress is grappling with these issues, I don’t believe it has focused near enough attention to an issue relating to the other end of the economic spectrum. I’m referring to the pay packages of directors and executives at companies that are participating in Operation Warp Speed, designed to assure rapid distribution of a Covid-19 vaccine as quickly as possible, once said vaccine is deemed to be safe and effective.
A number of companies that are partnering with the Warp Speed program have reportedly issued stock options to company executives (and in some cases board members) prior to the announcement of participation in the program. Subsequently, when publicly identified as participants in the program, share prices rose sharply and those option grants enriched company bigwigs by hundreds of millions of dollars. Among the companies identified as making such grants are Vaxart (CEO Andrei Floroiu), Novavax (CEO Stanley C. Erck), Translate Bio (CEO Ronald C. Renaud, Jr.), Inovio (CEO J. Joseph Kim), and most recently Eastman Kodak (CEO James V. Continenza).
My gripe isn’t with the appreciation of the stock. My gripe is with the granting of the stock options which directly dilute the stock, to the detriment of the existing shareholders. Issuing options in advance of an event that has a reasonable prospect of affecting stock prices may or may not be illegal, but it should be. The egregiousness of the practice is illustrated by the Kodak experience: Kodak granted a new round of stock options one day prior to the announcement that Kodak had been awarded a Warp Speed contract. This corporate behavior is deplorable, and those involved in it deserve to be called out and publicly shamed. (I’m doing my part.) In these cases, the existing shareholders may not care all that much, given the fact that they’re sitting on attractive gains, so what does it matter if the insiders skim a bit off the top? It matters because it’s wrong. It’s theft.
For those involved in this racket, it seems that it’s not enough to have the market reward them for their efforts. They need to take extra steps to extract more. These guys may be corporate heroes to some, and they may very well be critical to our finally getting a handle on our public health crisis. But to me, the way they’ve handled the financial aspects of their endeavors is worthy of our contempt.
The juxtaposition of corporate insiders getting extraordinary bonuses in their efforts to fight the Coronavirus in the face of millions of people unable to meet their basic needs says a lot about America, today. There’s room for improvement.
