Don’t bail out the cruise industry
theverge.com
theverge.com
If these companies avoid paying taxes by not being registered/incorporated in the US, how could they possibly be eligible for help from the US government?
That just seems like a contradiction, like a huge case of having your cake and eating it.
Carnival Corp and Norwegian both posted negative income tax expenses — that is, they received more in refunds or deductions than they paid or set aside for taxes — with Carnival reporting an income tax expense of $71 million and Norwegian reporting an $18.9 million tax benefit.
They don’t contribute to the public fisc in good times, they should have no call on it when times are tough.
> In general, under Section 883 of the Internal Revenue Code, certain non-U.S. corporations (such as our North American cruise ship businesses) are not subject to U.S. federal income tax or branch profits tax on U.S. source income derived from, or incidental to, the international operation of a ship or ships
From https://www.carnivalcorp.com/financial-information/annual-re...
Actually they did, see Panama Papers. So many higher-ups turned out to have a lot of money stashed away abroad.
Politicians are corrupt. I mean take Trump; while he 'officially' renounced control / ownership of his properties (I think?), he's still pumping hundreds of (tax payer) millions into his own resorts by going golfing every week in his own resorts. Said taxpayers are the common folk as well, not the actual resort itself.
And all of that without paying taxes.
Let them go bust. Almost nobody is missing them.
Outlaw ocean is an eye opening book (and a great read) about how lawless the sea is, how slavery is still very very real out there, and how it’s virtually impossible to keep eating fish once you know what’s going on (both in terms of human trafficking and in terms of quotas violation/fishing in U.N. “protected” natural reserves)
A huge portion of harm can be reduced/prevented with only a little effort. Don't let perfect be the enemy of good.
Battle cry of the conservative party lately. This quote has its place but not in the context of this conversation.
Be that as it may, by not eating fish you’re also not absorbing as much heavy metals which fish is rather rich in these days.
Strange.
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[0]: https://www.cbc.ca/radio/asithappens/as-it-happens-wednesday...
[1]: https://www.transportenvironment.org/press/luxury-cruise-gia...
Now sulphur oxide is nasty stuff, and regulated out of vehicle emissions for good reason. Fuel conditioning and catalytic convertors take care of this. But those things add cost, and why would a cruise ship company do it if they are not compelled legally and their customers don’t mind?
I don’t feel bad for giving my friends who go on cruises a hard time over this. Most will say they simply do not care about the environment. They are not immediately threatening their own immediate habitat. These are the people who go on cruises. The fact that the cruise industry exists is a sad mark on humanity.
> But those things add cost, and why would a cruise ship company do it if they are not compelled legally and their customers don’t mind?
Because their owners give a shit about the world they're leaving to their children?
Oh, well, I suppose they don't, then, do they?
Europe maybe not, but places like Honduras would be worse off without them.
The industry and shipyards are advancing technology in ways that other industries do not. New ships use LNG, batteries and renewables. A carbon neutral cruise ship is not too far away.
The intensive childcare offered allows parents who cannot otherwise get such services to relax.
Pixar's Wall-e was prescient in that most people would choose to live this way.
The demand for cruises is not going to go away.
In that case why the need for a bailout? If they are viable businesses either as is or after reorganization in bankruptcy, then what’s the issue that needs solving by the government? That the very rich owners and lenders lost money and wish they hadn’t?
I don't support a bailout for cruise lines, but I also don't support a bailout for airlines or any industry.
This pandemic crisis is being exploited on all fronts, and the first thing that everyone is going for is money. There is a lot of FUD being spread around as cause to bailout special interests, and that's a short term solution for a long term problem. It will only make things worse and more difficult in the end to correct the current problems at hand.
The focus shouldn't be on where to be spending money right now. The focus should be on developing proper procedures that at best prevents the next pandemic or at worst controls and minimizes its effect.
I don't understand - do you mean that airlines are not necessary components of the economy or that they are. And do you mean that cruise ships are or are not necessary components of the economy.
If airlines are necessary and cruise ships are not then it might follow that you should bail out one without bailing out the other.
I agree with you for self-inflicted problems (such as the financial crisis, or a lack of general funds).
Requiring all corporations to hold enough cash for 6 months of runway with 0 income however? That's an extreme requirement on which most if not all companies would fail.
Fair weather capitalists.
The debt/equity markets are beyond fucked at the moment. Relying on them is what led the financial industry to the 2008 crisis and it certainly won't be a good idea to rely on them in future pandemics.
> Fair weather capitalists.
The entire point of governments in a capitalist system is to deal with stuff that is too big for companies and individual people to handle - which a pandemic certainly is.
> The demand for cruises is not going to go away.
Good, then there will still be cruise ships after the industry felt the consequences, and perhaps they will have learned something.
Have you got some good links? This would be amazing, but sounds extremely unlikely.
On burden of proof, there's not going to be any relevant historical metrics for effectively a unique event. Politicians are simply going to need to make their best estimate of what services and capabilities are strategic and which aren't. If we only intervene where there is solid prior evidence for capabilities being needed to be preserved after a global pandemic in the modern era, we're just going to let everything burn. I don't think it's clear to me that is in the public interest.
Well I have been on one. A friend thought it would be a good idea to hold his 60th birthday on a cruise ship.
It is exactly as you say - a hotel, laid sideways. But unlike a hotel there no way to out, and in my case no internet worth using.
The primary ways people seemed to keep themselves occupied were drinking alcohol, eating food and watching other people in various ways. None of those thinks work for me. Exercise consisted doing the same brisk walk around and around the ship every day. There were other options, but you had to pay for them.
Counterpoint: they absorb a lot of tourist demand for visiting particular places, while taking up a minimum of space. Building the equivalent hotel capacity in the same places would be far more intrusive.
There are cruises which are "just looking" but the ones which visit heavily touristic areas tend to stop and let passengers off. Also these ships are enormous, loud and polluting. I think most locals would prefer hotels which at least contribute to the economy.
Most tourists are not coming by cruise. They're Italians (train to Rome is cheap and takes three hours), Europeans (dirt cheap flights) and other airborne visitors. Since it's easy to get to, lots of people go to Rome and then do a day or a night in Venice.
Santorini is tiny. It's set up as a luxury island for couples (and it's beautiful, so you see why). I guess cruising there is cheaper than ferry and hotel.
Mallorca is somewhere in the middle. Relatively cheap to fly there, cheap to stay and cheap to eat. But again, not designed for a thousand person instantaneous load who thunder through, buy trinkets and leave.
Remember you get a bed, breakfast and dinner onboard so why waste money on land if you only have say six hours to visit? (unless the ship docks overnight)
I'm sure the host country has a say in this...they can receive cruises or not so the "dumping" might be a different thing for them. Like tourism cash. At least they decide for themselves, not us.
You're absolutely right that most locals would prefer hotels - the economic contributions alone answer for the externalities that the OP was concerned about.
Cruise ships unload hordes of tourists who are then shepherded through the commercial center of town for a couple of hours. You'd think that's a good thing. It's not.
They don't go to restaurants for a full meal, they don't visit venues or do any activities. It's literally drop 'n shop. Meanwhile, they crowd the streets, not to mention the surplus of garbage. Commercial activity changes to low quality souvenir shops and fast food.
Local economy earns very little, but the costs of having them are very much for the locals.
With traditional brick'n'mortar tourism the people who fleece the tourists make bank. Then the people who fleece the people who fleece the tourists take their cut. The landlord, the plumber, the garbage collection company, everything including even the municipal government basically charges what the market will bear in order to get their slice of the pie.
Cruise ships piss off everyone who isn't running a tourist trap, T-shirt shop or cafe because they handle all the supporting industry so the people who normally fleece the people who fleece the tourists don't get their cut because the tourists don't have to stay in a hotel, visit a liquor store, etc, etc. in order to visit the beaches, the cafe's the shops, etc. because the cruise ship handles that.
I can't imagine anyone ever thinking, "gee, good thing the cruise ships dock in Barcelona, otherwise the prices at Carrefour and the supermercados would go back to being astronomical and the garbage collection services would be able to take full advantage of us again"
You can't make that assumption. There are a minority of businesses that are open in the off season that are used by locals. The majority of businesses are targeted at tourists only and any use by locals is incidental and immaterial to their balance sheets. Many of the business owners actually have other locations that they'll run in the off season (e.g. florida for the winter, nantucket for the summer).
Depending on the location (i.e. less true on an island where you have to incur a $100 ferry ticket to leave) many locals spend huge amounts of time traveling in order to buy goods at reasonable prices. Ecommerce (which doesn't generally change prices by location) and big box stores (which have rules about prices that franchise owners must follow) tend to be the places locals shop for goods in where possible. The further you get from pure tourism (e.g restaurant = 0 steps, restaurant's landlord = 1 step, landlords plumber = 2 steps) the more likely a business is to be open year round.
>I can't imagine anyone ever thinking, "gee, good thing the cruise ships dock in Barcelona,
Barcelona (or Miami for that matter) is lucky that it's a big enough city with enough other industry that normal economic competition keeps prices reasonable. Pretty much any city tourism destination will have reasonable prices there's other industry going on even if tourism is the big one. The quaint little towns with nothing but tourism are what I'm talking about. Sure, the locals who make their money close to the tourists would be angry if you parked a cruise ship there but there's also be a huge number hoping that the hotels and rentals lower their prices to compete with the cruises causing the restaurants to lower their prices, etc, etc so that they can actually justify the cost of going out to eat once in awhile.
>supermercados would go back to being astronomical and the garbage collection services would be able to take full advantage of us again"
The supermarkets where my parents live (they still live in the tourist town I left) fought tooth and nail to keep the chain known for low prices from setting up shop just barely within a reasonable driving distance. Many, dare I say most locals love outside competition because they can get more for their dollar.
I could tell you similar stories about damn near every type of business up to and including a scrap metal recycler.
Right, so if the cruises weren't there they would look to increase that "capacity" to accommodate that demand - which would likely mean building giant hotels.
> I think most locals would prefer hotels which at least contribute to the economy.
The kind of person who wants a cruise would probably favour a resort-style hotel, so it would be the same thing in terms of not eating at local restaurants, crowding into the same places, and the like. Hotels provide some employment but not particularly high quality employment (it's mostly precarious minimum wage jobs, no?), and meanwhile their existence pushes up land/building prices. Hotels might pay direct taxes, but cruise ships can be made to do the same.
Resort style hotels tend to be sited elsewhere with space for pools and recreation, and people don't leave (or they do so on a couple of tour coaches a day). Though look at Oxford or Cambridge in summer to understand how busy "the odd coach" can make a city centre.
Cruise ships are also full of mostly low-paid, high-turnover jobs (often seasonal). Hotels confine people which means they then go and spend time (and money) in the city. They might go for an early breakfast, eat out, see some museums.
In an efficient market everything operates at capacity. That doesn't mean there's no ability to adjust. In the absence of the cruise ships there'd be more demand for hotels, driving up prices; land values would go up, pricing more of the locals out. Restaurants and homes would be converted into tourist accommodation. Pressure would mount to relax the building regulations - not around the unique tourist attractions, but in the backstreets where it could be argued that there wasn't such unique architectural merit. And most important of all, fewer people would get to see Venice.
Everybody uses the same touch points, all day long. Most get their food from the same buffet line, touch the same food, the same drink dispensers, sit down at the same tables (which aren't cleaned often enough), sit on the same deck chairs at the pool, hold on to the same railings on the stairways (especially since the boat is moving), etc., etc.
They're all packed into the same space, making the same movements every day (room, to the stairs/elevator, to the buffet, to the stairs/elevator again, to the pool, to the stairs/elevator, etc.) Any virus that makes it to any common touch point is going to infect everybody in a matter of hours.
I suspect this is actually a bigger part of it than people realise.
I've been in very modern hotels that clearly had issues with their HVAC design as smells (bathroom smells... yuck!) from other rooms infiltrated through the ventilation ducts. I imagine this issue could be worse in a cruise ship given the small size of the cabins.
They won't make money, but they're not going to go bust.
I think this is a major problem with a lot of businesses; they consider time not spent earning money as loss, instead of just a period with less income. And I think it's the responsibility of ALL businesses to keep a savings account so they can weather economic downturns for a few months (at least 6), while paying their staff in full.
I mean it's only been a few months and they're already asking for handouts? Besides, whatever happened to pulling yourself up by the bootstraps and how communism and the state is evil?
I don’t like the idea of bailing out debt-laden, mismanaged companies. Let them go into bankruptcy and let a more competent group of people buy them and run them. This is doubly true for Boeing. Get those monkeys out of the executive positions.
Edit: My point being, we should let this happen. I see no reason to bail them out.
Why do people get this impression a pandemic, combined with an unprecedented economic drawdown, combined with one of the most vitriolic political climates we've ever seen is just going to "blow over", and in 6 months we'll be going along like nothing ever happened?
Covid19 might go away (or it might not, there's always that). But many things are going to change. Who's to say we don't now decide that cruise ships are a stupid idea, because they spread disease, pollute like crazy, don't pay taxes and need bailouts? Many industries disappear.
No reason to believe they could attract better terms at a time like this
It depends if you still have expenses, like e.g. rent.
The reason to justify employers/share holders getting paid so much more than workers should be that they take so much more and higher risks.
Now we have it backwards. When business is profitable the top takes all the bonus and dividends. During downtime however, workers get to swallow all the loss.
One of these ships is basically a 10 floor high city block that can sustain itself off grid for over two weeks. Surely we have a good use for that.
Dear God no. Please don't create a covid19 death ship. Covid19 has proven to be a ruthless killer on recycled air systems. It would be impossible to screen for the virus - it would certainly find it's way on board.
Though whether or not recreational cruise ships could be reasonably repurposed, and staffed, in time is a bit of a stretch.
Add to this that cruise ships are notoriously bad in containing viruses. Before we had this massive mess there were regular noro virus outbreaks on cruise ships.
ASo no, I don't think that's a good idea.
If the world congregates and places blame on the CCP for asking us to keep our borders open while knowing all along how contagious and deadly this virus was, that's criminally negligent. Maybe even malicious.
The behavior of the CCP after the virus spread internationally is equally alarming. They threatened to shut off access to medicines manufactured in China, placed blame on Italy and the US for the virus' origin, and shut down European and US travel to China.
Defaulting on debt is bad. But what if every nation collectively "cancelled" their debt to China? China would protest, but given the circumstance it doesn't seem like a credit downgrade would be necessary if this were taken as repayment for damages caused.
If we owe zero to China, we can then lend all of that money to businesses and individuals impacted. Pay off domestic debts.
I really like the idea of "cancelling Chinese debt". Now someone please tell me how this couldn't work. Would they retaliate? Would they consider it an act of war?
(I shouldn't have to say this, but I harbor no ill will towards the Chinese people. I love Chinese culture and studied Mandarin in college. I dislike the CCP and their actions.)
It also relies on not needing to borrow again in the foreseable future, and probably not on good terms when you do (decades down the line).
Trying to arrange 'every nation collectively' doing so sounds like a risky exercise in getting everybody to agree to your plan, and not side with China instead and make your (and anybody who did agree's) situation even worse.
Strictly worse than just firing up the printers, IMO.
I’m European though, so I may be more of a social democrat than most Americans.
Additionally, I think the government should be buying equity at a steep discount - something reasonable but not disastrous like 67%.
the gov't "loans" should be the same as the amount of equity obtained. For example, if the book value of the company is $100 , and the debt is $80 (so they need a loan of $80 to cover their debts), then the bailout will dilute all existing shareholders 80%.
The US bail outs that bought the bad stuff from the banks and slowly sold them off as the market allowed made a nominal profit.
(TARP recovered funds totalling $441.7 billion from $426.4 billion invested, earning a $15.3 billion profit or an annualized rate of return of 0.6% and perhaps a loss when adjusted for inflation.)
The other kind is what the central bank does, basically quantitative easing, just providing low interest loans to financial institutions - and basically to the government too (by buying US Treasury bonds on the open market). And then it becomes the banks' job to determine who to give loans to, and if they make bad calls eventually they will lose a lot of equity, so there market forces usually help separating the worse from the less bad.
The Norwegian government for example still owns more than a third of the biggest Norwegian bank as a holdover from a much earlier financial crisis (1990), and decided not to sell down further as a strategic decision to prevent future meltdowns.
The UK similarly bought a lot of bank assets during the 2008 crisis.
It's not a bailout for the cruise industry. It's a bailout for nearly every island nation in this hemisphere. We keep the tourism money flowing and they'll keep flowing exported raw materials and food.
Even if there are, if their economy were hurt by the lack of cruises, why would they hurt it further by refusing to sell anything?
Yes, I agree the system should not be that fragile, but for now it is.
Very few (if any) Americans depend on the existence of the cruise industry to make a living or otherwise survive in our society. For the ones who do, it'd be cheaper to give them individual "bailouts". Cruise ships contribute jack all to the national or global supply chain except as consumers of it; letting cruise lines fail means more capacity on that supply chain for things that actually do matter (especially in times of crisis).
Even bank bailouts have a better value proposition, and that's saying something.
Trade imbalances aren't good for economies and eventually lead to wars 100% of the time. Read about the Opium Wars if you want a textbook example of this.
I mean, so what? If there's so much demand, presumably new cruise lines will show up at some point when the current ones collapse. In general, "[a small minority of] people like it" is not a sufficient reason to bail something out; government bailouts are inherently limited and should be targeted at where they will do the most good. Realistically, where they will do the most good, by _any_ metric, is not cruise lines.
Why don't we have a discussion about which industry provides important services to society? And particularly how helpful it is likely to be in the larger crisis we have looming over us - climate change - and which won't go away? It seems like the absolute worst idea to bail out high carbon industries, and that's not just true for cruise ships, but also for airlines and many others.
When I was a kid we crossed the Atlantic in the SS United States. For a kid, that was a blast, especially when we steamed through a huge storm. Wowsa! I'm sad to see the rusty hulk it has become.
The Norwegian coast can be quite rough in the wintertime - a friend of mine is the steward on one of the ships, and she assures me every winter there are numerous passengers who insist on being dressed up in full survival kit and quite literally being tied to the mast - to experience the full wrath of a winter storm from a safe position.
To each his own. It probably isn't boring, at least. :)
Sorry for OT/meta.
But Carnival cruises, who cares if they go under? another one will prop up with a better business model that is sustainable.
Every company should be able to weather a couple of months if they rode the bull for the best 11 years of stock rise in history. If your executives fucked it up, too bad. You can get a low interest loan, but no free bailout money.
Bailout money should be used to help people during unemployment.
For non-public and small business there can be funds set aside to help them.
And then yes, simply increase unemployment distributions for the time bring to 80% previous income for a couple months.
If the gov't bails out the cruise liners, they may be able to force them to continue paying the employees in the intrim, and so "save" them from being unemployed and "save" welfare. The gov't can also end up owning equity in the business (which is not a bad thing - it's basically extra income for the state/treasury in the future).
Many hundreds of people come on the streets in groups, go throught the streets loudly and fast to take photos, than go back to the ship.
People who really go to these places and spend money for staying and try to blend in to have a peaceful vacation can't.
I have seen videos of how they're also reducing the usage of cars to make it a walkable/bicyclable city, I would love to see Amsterdam some time (probably not this year due to coronavirus though :( )
It is a popular port for cruise ships doing the Norwegian coast. I assure you, during summer season one could have 2-4 vessels in port - effectively a DoS attack on town.
Getting from A to B on foot was nearly impossible, forget any shopping or café visits - a town built for 10,000 suddenly had twice as many people in the streets. Go figure.
While the cruise tourists leave a little cash behind, it is much less per head than, say, camper van tourists do.
I didn't mind all that much - but I can see valid reasons for not wishing to have a cruise entourage come crashing down on your hometown on a regular basis.
I love to travel, but I try to stay at least 10 days on any place I go to and learn a bit of the local language and customs.
For that I really need the airlines to work, but if they get more expensive, I understand, and will just make longer vacations at less places.
did you just no true scottsman vacations?
It is impossible to "blend" somewhere in vacation. You have to live many years somewhere to blend. You are exactly like the cruise ship tourists if you stay for a few weeks.
You can do that as a plane tourist too, but it's far less common.
As soon as you stay even one night you are NOT like cruise tourists. You probably had at least one dinner and one hotel stay. Good tourist.
Cruise tourism usually pays very little to local business but the crowds and pollution is there anyway.
I disagree that cruises are an effective way to visit a place at all, let alone on a low footprint.
The other stops were a little better, but were all still clearly "cruise towns" with hour+ long bus rides to the next nearest populated place.
I'm not saying there weren't interesting differences. The entire experience was, in fact, extremely novel to me. I don't feel like I've "visited" any of the countries we stopped in, however, any more than I feel like I've visited changeover cities where I never left the airport.
[0] https://1ypfazc0twx431e6w2jik5nw-wpengine.netdna-ssl.com/wp-...
Per-person? Surely anyone arriving by car, aeroplane or even bus is causing a lot more pollution, just on the sheer physics of how much more efficient sea transport is.
> Also, cruise visitors use the city's facilities (roads, trash collection, beaches, etc) but don't leave much money behind to compensate.
Surely that can be balanced with appropriate taxation - I believe a lot of places already levy a per-passenger tax for cruise ships berthing there.
[0] https://www.sierraclub.org/sierra/ask-mr-green/which-better-...
[1] https://www.theguardian.com/travel/2006/dec/20/cruises.green
[2] https://grist.org/living/you-thought-planes-burned-a-lot-of-...
Cruise ships manage to contain norovirus[3], but we’ve seen how different the consequences are when NCoV is present on a cruise ship.
[1]: https://wwwnc.cdc.gov/travel/notices/warning/coronavirus-cru... [2]: https://www.cruise1st.co.uk/blog/cruise-holidays/how-old-is-... [3]: https://www.cdc.gov/nceh/vsp/pub/norovirus/norovirus.htm
It's better to prop up companies and industry for the short term if it means thousands of people continue receiving a paycheck and can afford to live.
Suddenly laying off all those people while companies and vendors collapse will lead to major cascading effects that can be far more disastrous.
Well, it would be nice if you're right...
Fuck em.
Cruise ships, however, do not. They are purely recreational and the economy would not fall apart if they were to go. They also share some of the blame for spreading Covid-19 in the first place!
Why? The planes are not going anywhere. If airlines fail, someone will be able to buy them at a discount. They will need to hire pilots and cabin crews. Shareholders in airlines will be hit - as it should be.
But that only strengthens the point of the article: the optics of an actual bailout would be so much worse and the outcome would only really differ for shareholders.
Whereas Delta & friends have a large footprint in the US, lots of jobs, lots of purely US service. Still not obvious whether they deserve help, but they are clearly very different organizations.
What critical industry will suffer if air travel suddenly becomes much more rare?
(I'm only pretending to have missed the "critical" before "industry", of course you are completely right)
Maybe the replacements will create an ethical, sustainable, and environmentally friendly business instead.
Multi-million (let alone billion) dollar corporations, however, are not in a comparable situation, and re: them I fully agree with your take. If they accept bailouts, they should be prepared to also accept "We the People" democratically controlling them as publicly-owned cooperatives; the moment you depend on taxpayer money for your existence is the moment you forfeit the "right" to anything but taxpayer ownership.