Despite the Beatles folding 50 years ago, it appears the Blue Meanies are still around. That is the only possible explanation for this latest diktat from the Trump administration that bankrupt companies don’t get to enjoy relief funding from the Paycheck Protection Program. Just because someone has already shown they can’t run a business during the previously strong economy, why should that mean they don’t get free money? After all, everyone else is.
We can all have our doubts about whether spraying a couple of trillion dollars around is the considerate reaction to anything at all, let alone what is working out to be no less than a pandemic. We can also ponder the silver linings here because the progressive project appears to have taken two fatal head shots at the same time.
Firstly, given the performance of government as a whole here — the CDC/FDA nonsense over testing being just one example — who is going to entrust the bureaucracy with anything more complex than potty training in the future? Perhaps even potty training might be too complex. Secondly, there’s no money left, we’re all going to be paying for this over a generation, so we don’t have the funds for any bright new adventures in government inefficiency.
But is there anything we can congratulate upon, something actually done, in these hard times? Yes, a certain detail about the distribution of those relief funds in the Paycheck Protection Program. The Trump administration has said that the small-business loans being doled out by the bucketful cannot be accessed by those companies already in bankruptcy. This means that some to many of them will close, will go from reorganization under Chapter 11 to being carcasses picked apart under Chapter 7. As I’ve said before, that bankruptcy process is the right place to be deciding who should survive and who shouldn’t, because that’s our system for deciding upon that question.
Which gives us our answer as to whether those in bankruptcy should be getting the free cash, doesn’t it? We are trying, best we can, to save those parts of the economy that are being blindsided by either the coronavirus pandemic or the (possibly overeager) lockdown of the economy to avoid it. We’re saving businesses that have value to us now and in the future and which weren’t prepared for this disruption.
So, what’s a useful definition of a company that’s already bankrupt before the disruption? The very fact that it’s in bankruptcy is the proof that it doesn’t have value to us now, so what’s the point of trying to preserve it into that future out of the limited resources we have to deal with the pandemic? Quite, there’s none, is there?
The harsh times do mean that it’s necessary to squint quite a bit to spot those silver linings. But this particular decision by the Trump administration is one of them. Not spending cash to preserve businesses which have already proven, by going bust, that we don’t want them is both sensible and being usefully selective on where those stimulus funds go. Sure, it’s a pity that society will be saying “bye-bye” to those failures, but this is the very point of a market economy in the first place: killing failures to make room for possible successes to have their strut in the sunshine.
The entire point of the capitalist process is the constant pruning and culling to leave us with only those organizations and businesses that we do want, that add value to our lives.
Tim Worstall (@worstall) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a senior fellow at the Adam Smith Institute. You can read all his pieces at the Continental Telegraph.
