In recent news, the world has been impacted by a virus called COVID-19 that has left tremendous effects on many of the world’s countries as the doctors and many first responders are in search of a vaccine. The pandemic affected every country around the globe and devilishly infecting the global economy as some economist experts say that this will lead us into a worse recession than 2008. The United States government has passed a $2 trillion stimulus bill to help aid medical services, individuals, and businesses that are struggling to maintain business. Should the US government give this financial relief to the cruise corporations?
The $2 trillion stimulus package breaks down to $350 million to small business to maintain payroll expense, $32 billion for wages and benefits to the airline industry, a $1,200 check per individual that made less than $75,000 in 2018 or 2019, $600 in unemployment checks, and the remaining amount allocated to medical services, other impacted industries like the travel industry, and local government if needed.
The stimulus may indeed be needed to help stimulate the economy and prevent another depression. As an article from Klaas Staal mentions, “The positive effect of stimulus spending became significant in 2010. This contrasts with Klein and Staal ([23]), who found a positive and significant effect of the stimulus from the first year (2009) onwards. This is an important difference, as one of ARRA's objectives was to offer a quick response to the economic crisis (e.g., GAO [21]). It carries an important policy implication, i.e., it shows that the response to increasing Medicaid transfers, (Klein and Staal [23]), is potentially swifter than the other components that were also included in this analysis.” To help prevent an economic crisis, an increase in government spending with stimulus funds can result in a positive outcome and possibly even greater economic growth. Some will disagree that government spending will, if anything, further hurt the economy as stated in this article, “Where monetary policy had lost its conventional means of influencing the economy through interest rate decreases and the U.S. government enacted the Recovery and Reinvestment Act in 2009 intended as a countercyclical fiscal measure.”
As the Center for Disease Control suggests people stay ‘quarantined’ during this time to prevent the spread of this virus, the travel industry has lost almost 90% of their customers and are even flying planes carrying no passengers other than the flight crew. Many local governments and whole state governments ordering a Shelter in Place and a state of an emergency causing most ‘Essential’ businesses to stay open such as convenience stores, gas stations, banks, post office and shipping businesses, transportation, and many more. Many ‘nonessential’ business has been forced to close and/or even layoff their employees during this hardship.
Many small businesses that took people years to build; might no longer be in business after this impact on the market unless they adapt to these new conditions in the meantime. The stock market having a dreadful time this year. The Dow Jones Industrial Average plummeted 23.03% on March 11 from February 12. The downturn in the stock market ended the 11-year bull market that started in 2009. Surpassing the downturn that happened on Black Monday, October 19, 1987, when the Dow fell 22.6%.
The travel industry felt a major impact or halt in business as this pandemic sparks the fear and stops travel on flights, cruises, etc. While being called an ‘essential’ service. Some sources estimating the loss of $900 billion during this pandemic in the travel industry alone. Not only affecting the current loss of business, but jobs as employers even go as far as firing people for not having money for payroll. The unemployment rate has already doubled in February since the beginning of 2020.
Many companies do desperately need financial support during this hardship, especially those companies in the travel industry. Airlines, travel agencies, and many more, but one aspect of the travel industry does not. The cruise companies, who make millions each year, have been impacted and given the nickname ‘disease ships’ as fear rises. These cruise companies technically do not reside in the United States. They reside in different countries to evade paying corporate taxes in the US. Millions of dollars have been acquired by the company that would have been paid to the US government. Carnival having vessels based out of Panama, Bahamas, and Malta. The Disney Cruise Line is based out of England. Many analysts have said that the major cruise lines do have the money to stay afloat for at least the next six months.
From 2010 to 2018, the economy grew at an average of 0.50% per year. While business was good during that time, many cruise companies have been having growth as well. The Disney Cruise Line has earned $59.4 billion in revenue during 2018. Robert Igor, the chairman, and CEO of Disney, had earned $47.5 million in the last fiscal year. Not only has Disney’s CEO earn millions of dollars every year, but many other CEO’s of other cruise corporations.
There is an article about how one business survived the Great Depression. “This was especially true of the banking sector. However, some banks did survive the Great Depression, and a few appear to have thrived in that harsh financial climate.” The First National Bank of Oxford (FNBO) was founded in 1910 and the bank’s first president was John Wasley Thompson Falkner who worked as a bookkeeper in 1918. The FNBO was the smallest nationally charted bank in Mississippi during this period according to the national average in terms of capital, surplus fund, total resources, total individual depositors account balance, dividends paid, and undivided profits. Even without much capital or money in the bank at the time, the FNBO managed to survive the Great Depression, one of the worst economic recessions in history.
The $2 Trillion stimulus package is set to help the global economy during this hardship of Covid-19. Many small businesses desperately need this financial assistance, but many of the cruise corporations, that have millions in revenue each year, maybe do not necessarily need financial assistance. With many of the major cruise corporations having enough money to stay in business at least in the next six months. Especially since many of these cruise ships are based out of various countries and not in the United States to avoid paying a corporate tax every year.
Works Cited
Staal, Klaas. “State-Level Federal Stimulus Funds and Economic Growth: The American Recovery and Reinvestment Act.” International Advances in Economic Research, vol. 26, no. 1, Feb. 2020, p. 33. EBSCOhost, doi:10.1007/s11294-020-09772-6.
KLEIN, MATHIAS, and LUDGER LINNEMANN. “Macroeconomic Effects of Government Spending: The Great Recession Was (Really) Different.” Journal of Money, Credit & Banking (John Wiley & Sons, Inc.), vol. 51, no. 5, Aug. 2019, pp. 1237–1264. EBSCOhost, doi:10.1111/jmcb.12558.
Bostwick, Eric D. “The Little Bank That Could: An Examination of the Historical and Financial Records of One Bank That Survived the Great Depression.” Accounting Historians Journal, vol. 46, no. 2, Dec. 2019, pp. 17–31. EBSCOhost, doi:10.2308/aahj-52528.
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