It’s a strange conundrum: If a company gets too big and successful and dares earn too much money, the US government accuses it of being an evil monopoly and tries to break it up.
And if it loses too much money, the government swoops in and bails it out with taxpayer dollars — as we’ve seen multiple times now, from banking to the auto industry.
Rewarding failure and punishing success isn’t a very smart economic game plan.
In the latest chapter of this saga, the federal government is reportedly about to provide a half-billion-dollar taxpayer bailout to Spirit Airlines.
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It’s not clear how one bankrupt institution — the US government, $39 trillion in debt and counting — can bail out another one, in this case the nation’s sixth-largest airline, with less than 5% of the market.
This story is slightly complicated because Washington played a major role in Spirit’s current financial predicament.
Three years ago, when Spirit was in severe distress, the “job-killer B’s” of the Biden Administration, Transportation Secretary Pete Buttigieg and old Joe himself, blocked a move that could have avoided today’s crisis.
Neither of them has ever actually run a business, but they ruled out a merger between JetBlue and Spirit on antitrust grounds — even though the combined airline would have less than 10% of the market.
It was a truly tragic intervention: The merger would have combined the fifth and sixth largest airlines, thus maintaining competition in the skies.
It would have benefited the shareholders of both companies and thousands of airline workers.
And it would have given millions of air travelers more choices against the industry big boys, American, Delta, Southwest and United.
I and many others predicted that Biden’s call would end up in Spirit’s bankruptcy — and everyone would lose.
If a bailout is coming, we can add taxpayers to that list of losers.
Under the plan, Uncle Sam would reportedly give Spirit up to $500 million and the government would “receive warrants to take a potential significant stake” in the company, keeping Spirit temporarily afloat.
But that first half-billion could be just the beginning: The deal could end up with the federal government owning 90% of a failing airline.
Great — now we’ll have the federal government playing the role of investment banker.
Federal bureaucrats will be picking winners and losers.
And the politicians have a long and inglorious history of picking losers.
Think of the hundreds of millions of dollars lost under President Barack Obama’s so-called stimulus, when the government turned itself into a venture capital fund and “invested” in companies like Solyndra and Fisker Auto — celebrated solar panel and electric car manufacturers that went bust after huge infusions of tax dollars.
How many times have we been told that Amtrak and the US Postal Service are about to become profitable?
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Then there’s the $400 billion the feds in the last decade “invested” in green energy — the rate of return on which was very close to zero.
We shouldn’t forget about the $9 billion CHIPS Act equity injection to bail out Intel: They’ve had nothing but financial trouble ever since, while unsubsidized NVIDIA has become America’s chips champion.
The federal money has been a curse, not a blessing.
That’s why Texas Sen. Ted Cruz is right to call this Spirit bailout “a terrible idea that will end up with big losses for taxpayers.”
It won’t end well.
The federal government should never have blocked the Spirit-JetBlue merger, but a bailout now just adds more government interference to a problem the market should sort out.
If Spirit goes out of business, another, more efficient operator will eventually acquire its assets and fly those planes and routes.
The airline industry is highly competitive, with more flights and more price competition than ever.
Airline fares have been rising more slowly than the rate of inflation in the last three years — in part because since 2000, the share of domestic passengers with access to lower-cost carriers rose from 62% to 89%.
Even without Spirit, the airlines will find a way to move people from point A to point B, assuming there’s enough demand for it to make economic sense.
What we don’t need is an Amtrak in the skies.
Stephen Moore is a senior fellow at America First Policy Institute and co-founder of Unleash Prosperity.
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