March 27, 2020 10:17AM

No Bailout, or Stake, in Airlines

By Jeffrey Miron and Erin Partin

According to new reports, Treasury Secretary Steven Mnuchin has indicated that the U.S. government will take an equity stake in the airlines as a condition of the industry’s $58 billion bailout from the $2 trillion COVID-19 relief package.

From one perspective, the equity stake might seem appropriate; if the airlines’ shareholders get a huge transfer from the government, then shouldn’t taxpayers get repaid (from selling appreciated shares) once the airlines recover?

From a different perspective, however, the equity stake is troubling; it makes government a direct owner of a private industry. Crony capitalism and regulatory mischief are sure to follow.

The way to reconcile these concerns is to skip the bailout.

Yes, the airlines can claim, with some reason, that government contributed to their misfortune (e.g., by cancelling travel to other countries).

But many industries can make similar claims. Setting appropriate compensation across sectors would be difficult, expensive, and likely generate huge inequities based on which industries have the most political clout.

Why not avoid all these messy problems and risks and let the taxpayers keep their money?