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What I take away from this is that the airline bailout prevented me from getting some sweet, sweet deals on used Boeings last year.

No point crying, though. I may still be able to get good prices on the 737-max. Guy told me those are falling fast.

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You know, one of the big takeaways about why we did so much better at rescuing the economy in 2019 versus 2008 is that there was so much less concern over who "deserved" aid or a bailout. Progressives (including me) need to be less concerned with whether companies that don't need money are getting it, and more concerned with whether companies that DO need the money are getting it.

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As someone responsible for much of the airline industry relief package, this is a great post. A few quick thoughts: The program is bit more specific to Matt's point. It was borne of labor's experience with previous "bailouts" that restructured union collective bargaining agreements, including the Bush Administration's use of the post 9/11 airline loan programs to change union benefits, most specifically at America West. So this program was (1) an employee pass through program, (2) prohibition on governmental interference in contracts, and a prohibition on furloughs.

Crucially, the furlough prohibition enabled continuity of employment. If not for this, there would be a large mismatch between available pilots and demand. Pilot labor is incredibly complicated by a few factors: (1) how "current" a pilot is in training, (2) pilot seniority, and (3) the allocation of pilots between different types of aircraft. If there had been mass furloughs, you would have not had enough pilots and we would be struggling to get pilots who wanted to fly to actually operate airplanes. Instead, we would be looking at massive interest in air travel and very little ability to meet demand, with attendant price affects and capacity. The program was specific to protect the employees and reduce the large cost of employees for airlines.

Importantly, the view put forward by Chamath and many in red rose Twitter that bankruptcy is an orderly and fair process for employees is simply insanely wrong. The bankruptcy code allows businesses to seek permission to dismiss union contracts and create dictated, inferior terms in their place (11 USC 1113). Simply put, airline bankruptcies are horrible, disproportionate, and unstable for both workers and companies.

Finally, I think the airline program provides a very interesting window into the debate of employee subsidy vs UI. Putting aside the pedantic (and wrong) view that there is no meaningful difference, I'm biased in favor of the former. Because of the employee pass through "bailout" airline employees did not sever their employment bonds, can continue their careers, are able to respond to demand, and can keep health care and retirement savings. "Scrambling the egg" by disemploying workers and hoping they reattach to the labor market creates a lot of uncertainty for all parties and is quite miserable and precarious for the actual employees. In many circumstances it may be desirable to reallocate labor, but an exogenous shock like a pandemic seems like a cruel time to do that.

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This article tries to answer an empirical question without much data. Rather than digging for numbers, Matt uses three restaurants in his urban bubble as proxies for the entire industry. There is no effort to measure the cost of reopening restaurants after a hiatus, which appears to be the main “evil” Matt is arguing against. Nor is there any effort to measure the cost of the proposed bailout or the economic or political effect of borrowing that amount of additional money. Finally, there is no attempt to quantify the amount of fraud in PPP loans or the proportion of bailout funds that would have been swindled into the pockets of owners.

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Happy birthday Matt!

As to the post, I don’t know. Hindsight is 20/20 and with perfect knowledge of the course of the pandemic, effectiveness of demand-side stimulus, and consumer behavior in the face of those, there is certainly more we could have done on the supply side. But every crisis is different so hard to know where the key pressure points are ahead of time (e.g. restaurants are straightforward but who would have thought about used cars or lumber?). And I remain skeptical it will take long for new restaurants to emerge to fill the demand. Startup costs are not that high, private credit easily available, and labor will increasingly be returning along with customer demand.

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I couldn't imagine how psychologically difficult it would be as a small business owner to lose your business and then have to go through the local approval process to reopen (and front all the opening costs again).

Not sure what it's like in DC (pretty sure it's similar) but in my little town the average time to open up a new restaurant that doesn't require a zoning variance is over a year. And if you need a variance? Well despite having over 30 restaurants in a town smaller than a square mile we don't have any indian restaurants for this reason.

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The retail food shortages we all remember from spring of last year didn’t come from a lack of supply, they came from the necessary re-plumbing of the food supply system that nobody ever thought we’d have to do. That impacted restaurant owners because they just couldn’t get a Sysco truck even if they wanted a delivery because WalMart overnight needed food for their stores. Prepandemic, half of all food was eaten away from home. That’s an entirely different logistics. The good news for restaurants now is that this system has been slowly reversing itself and can follow the 2020 blueprints in reverse. But don’t expect your local coffee shop to have the same blends just yet. Actually, weird niche stuff will be ok, I should say, don’t expect your chain restaurant to have all the pasta dishes back to pre-pandemic proportions for a couple months. But, just to add to what Matt is saying, don’t fall in to the pessimism. I am truly amazed at how the plumbing from farm to fork eventually got re-routed to consumer retail when you realize how much of that system was geared toward institutional and restaurant deliveries.

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>>>This is especially important because I don’t see a lot of Schumpeterian reallocation happening in this space.<<<

It’s early yet. I suspect we will see a great deal of new restaurant opening activity as the months go by. And perhaps these new establishments will be in a better position to meet the needs of the new normal, in terms of greater labor saving technology, more relevant menu choices, a greater emphasis on takeout and delivery, etc. And if the sector as a whole does not quite reach its pre-pandemic size, that might be OK too, as it will free up valuable human resources for other, more productive sectors. It would certainly appear a lot of restaurant workers are reluctant to return to poor working conditions and substandard wages. I’ve personally been something of a skeptic of the “everything is different now” line of thinking with respect to the aftermath of this pandemic, but the restaurant sector strikes me as very likely being the real deal in terms of substantive, long-term change.

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Happy 40th Birthday -- it's a milestone that forces you to accept that you are in fact middle aged and wonder if you will now just start celebrating as you turn new decades. But all in all I thought my forties were a lot more chill than my thirties and it was a relief to be past that stage of constant uncertainty about the future...Hope you support a local restaurant and have a great meal.

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There is a restaurant bailout currently underway. It’s the Restaurant Revitalization Fund. It’s a $28 billion dollar bailout that is doling out money to struggling restaurants right now. President Biden gave the first restaurant it’s grant personally a few weeks ago.

The strange thing is Congress made it a racial/veteran/woman empowerment bill. As it currently stands, the only restaurants who will get funding are owned by veterans, women or minorities. These groups were given priority and the funds ran out before the end of the priority period.

I expect Congress to increase the funding of the RRF, but as it currently stands, the government made this bailout into a form of reparations and veterans’ benefits.

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The used car stuff is confusing. Demand spiked last year as consumers sat at home with extra cash, but supply also increased as rental companies liquidated their fleets? Now the rental companies want to rebuild their fleets, so there's more demand than supply of both brand new cars and good condition, newer used cars because they were all bought up by consumers last year? Is that it? Did a lot of older used cars get crushed and taken out of circulation? Not that rental companies would buy banged up older cars. It does sound like a temporary weirdness though.

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Lots of people dream of opening a restaurant. Until they do.

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The airlines should have been forced to give up some equity in exchange for the bailout. They invited trouble by operating with too little risk-adjusted capital (largely due to stock buybacks) in order to maximize profits and margins. Future bailouts (which will occur) should come with a hit to equity, or a "capital adequacy" rule along the basic lines of what banks have, and for some of the same reasons.

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Just a minor note about airline bailouts. Congressman and senators are amenable to airline bailouts as they are traveling back to their districts so often.

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Anecdotally, restaurants in NYC are fine. I have been talking to friends who own restaurants and bars and they've told me they're flooded with bailout money. One interesting tidbit is that since they can only use the money for operating expenses and not growth and have to give the leftover money back in March 2022, they're cutting deals with contractors to pay them for 5 or 10 years.

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The underestimation of how quickly and well the government could respond to the pandemic was, at least for me, entirely due to Trump (and Fauci, and the WHO) running the show, telling people obviously incorrect things about how the virus spreads and what mitigation steps to take. It's crazy that I, a random dude who read a few papers about the virus, knew the virus was airborne in April 2020, something the CDC just admitted more than a year later.

And Trump was acting in a way that fet like he was on the coronavirus's side. So I think it was pretty fair to assume that we wouldn't have things under control for years. The vaccines being developed so quickly and working so well are a miracle that no one expected.

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