[0]: https://www.federalreserve.gov/releases/h41/current/h41.htm
In June they just committed to deploying an additional $250 billion https://www.wsj.com/articles/fed-will-amass-corporate-bond-p...
Add this to the existing billions of debt already purchased and we could easily be at half a trillion dollars of independent fed action to buy corporate debt in a short time frame.
The CARES act also reduced corporate taxes by 210 billion. So There is at least half a trillion dollars not mentioned in articles like the one from NPR.
The CARES act separately authorized 500 billion just to the largest corporations in America. Some of the additional hundreds of billions deployed to "small" businesses is really to large companies as well.
It would be great to get a detailed breakdown of what the fed is doing, I am certainly not doing it justice in my description.
Unemployment is money given away to another. It's a permanent giveaway.
A debt purchase is either money that was given to you, that you're now returning (Treasury securities) or money that you're giving to others which will be returned (corporate bonds). It's not a giveaway at all - the net exchange is $0.
These cannot be compared as equivalent.
The tax reduction changes the way loss is calculated to better capture the reality of the economy falling apart in one year, letting losses be deducted from income generated in past years. There's a tax savings, but it's reflective of real loss incurred by business.
The corporate tax reduction is equivalent to a handout since it won't be paid back. As is the paycheck protection program.
I agree that debt is not a 100% handout, but it is definitely not a 0% either. The fed is not that worried about qualifying its purchases and some of these companies will still go bankrupt: those cases may be 100% handouts. The debt is being purchased at above market rates and inflating prices for the asset so that's still a noticeable percentage of handout for the loans that get repaid.
But I wouldn't assume that corporate debt will ever truly get repaid until I see the fed balance sheet go down. They tried to unload just a little bit last year and the stock market went down so they stopped. We now have 1.9 trillion in mortgage backed securities even though the housing crisis is over and housing prices are back to the levels of the prior bubble.
The tax change isn't a reduction per se, it's a change in the way we account for losses across multiple years. It's also very new -- it's removing a new carryover rule that was added in 2017. I think it's also disingenuous to frame this as a reduction as the losses would be carried forward anyway. It is, like most of the other "corporate handouts," more of a shift in when the money is paid rather than a change in the amount.
Thanks for the correction on the corporate tax reduction.
Purely from the financial side, another way of looking at this is: if bail outs were really net positive then the private sector would handle it. If the government has to handle it, it is a bail out. Governments almost always lose money on bail outs. Sometimes, like the last one, it is falsely claimed that the government made a profit. It probably lost money [1] and we still have 1.9 trillion mortgage backed securities on the fed's books that are unaccounted for in such claims.
I agree that these things are not a 100% handout, but they are most definitely a bail out.
[1] http://gcfp.mit.edu/wp-content/uploads/2019/02/BailoutsV12.p...
Historically, looking back at 2008-2009, purchases of corporate debt by the government either turned a profit or lost very little money. The 'bailouts' had aggressive terms and were repaid.
If it does turn into a subsidy, the correct measurement is the difference between what the government pays today and what they sell it for later, or, if it defaults, the bankruptcy settlement value (which in the case of collateralized loans is rarely zero). Not the dollar amount of bonds purchased or money lent.
This year, purchasing of corporate bonds has been focused on investment grade debt. It is unlikely they will experience any significant loss on this.