Lydia DePillis Profile picture
Sep 12, 2020 17 tweets 5 min read Read on X
Happy Saturday. It’s 169 days since the CARES Act passed. As Congress dithers on another relief package, I want to show you what the stimulus has done for people, from the lowest-paid worker to the most profitable Fortune 500 company.

It’s time for a trip to Cleveland. (THREAD)
While reporting on the stimulus’s effects, one truth has jumped out: An outpouring of cash kept many small businesses afloat temporarily, but the law’s most generous, least conditional support went to large companies & the investors who back them.

It was a big corporate rescue.
This happened because the CARES Act allowed the Fed to purchase virtually unlimited quantities of corporate bonds, fueling a rapid recovery in the ability of corporations to borrow -- especially riskier companies that had already taken on a lot of debt.
One such company, the aerospace-focused holding company TransDigm, caught our eye for a few reasons: A history of aggressive borrowing, high profits enabled by sole-source contracts, generous executive compensation, and a skyrocketing stock price pre-pandemic. (This is their HQ.)
After the Fed announced its plan to backstop the bond market in March, TransDigm issued $1.5 billion worth of bonds at a moderate interest rate. Unlike the CARES Act’s other programs, this favor didn’t come with requirements to retain workers or stop shareholder payouts.
TransDigm, which referred to the extra $1.5b as an “insurance policy,” proceeded to lay off 15% of its 18,300 workers, allowing it to maintain its 40% margins. It could use that extra cash to keep buying up companies, TransDigm told analysts. fool.com/earnings/call-…
(A TransDigm spokesperson says that the bond issuance was a “prudent measure to ensure the company maintained liquidity” at a tough time for the aerospace industry and that laid-off employees received $4,000 payouts to help defray costs.)
So what does this all have to do with Cleveland? Well, that’s where TransDigm is based -- and we wanted to figure out how much the CARES Act had helped the city, as opposed to the corporations it hosts. (Because these days, those are two different things.)
Adding up all the CARES $$$, from unemployment insurance to money for hospitals, Cuyahoga County got ~ $6 billion. That’s a lot -- around $5K for every county resident. But just for comparison’s sake, TransDigm’s April borrowing came out to $82K per employee.
And of course, the stimulus wasn’t equally distributed. PPP funds went to firms that barely lost revenue, for example, while the neediest missed out. The county hasn’t even spent $100m because it has to be used for COVID-specific stuff, not to fill its enormous budget hole.
But the biggest problem is that the money was supposed to last only as long as it took to beat the virus, and that hasn’t happened yet -- so with the Cleveland economy still only partially open, businesses and unemployed workers are running out of help.
What that means: The convenience store downstairs from TransDigm’s headquarters surviving on a fraction of its pre-pandemic sales may have to close. This is Gary Patel, who's run the Erieview Newsstand for 20 years, and likely won't make it to 2021.
Neighborhoods like Slavic Village, hard hit by the foreclosure crisis 12 years ago, have taken another hit -- its diners are half full, its barbershops serving only a trickle of customers, the industrial factories on its border laying off hundreds. Food pantries are slammed.
Big corporations, however, continue to benefit from the Fed’s policy of keeping interest rates low and propping up the bond market, fueling their ability to buy smaller competitors. That aid doesn’t expire and it doesn’t come with strings.
Stepping back, the Fed may have been wise to keep credit markets from seizing up. But it’s not well equipped to help small businesses. That’s up to Congress, which this past week couldn't even pass a "skinny" bill, while at least 13.4m people remain officially unemployed.
Anyway, it was an honor to work with @paulkiel and @JustinElliott on this one, with great photos by Theo Stroomer (theostroomer.com) and help from @jilliankumagai and @eisingerj and so many more. Take a read: features.propublica.org/cleveland-bail…
And sign up for our big story newsletter to get more of my colleagues' best work: propublica.org/newsletters/th…

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More from @lydiadepillis

Dec 26, 2022
This week in the NBERs, surprising evidence that youth suicides actually rose when schools reopened post-pandemic, mirroring a longstanding trend (which I hate is even common enough to track) of suicides rising when kids go back to school in the fall: nber.org/system/files/w…
(I guess I say surprising because of reporting by @AlecMacGillis and others about the pandemic's impact on teens' mental health: propublica.org/article/the-lo… )
@AlecMacGillis Less surprising but also saddening, a study showing the short and longer term financial and educational impacts on victims of domestic violence and their kids, based on data from Norway:
nber.org/system/files/w…
Read 5 tweets
Jan 17, 2022
Great paper in the NBERs today from @davidautor et al. finding that the PPP was:

- Expensive: $170-257K/job-year retained
- Regressive: 3/4 of funds went to top 5th of households
- Badly targeted: 25-34% went to workers who would've otherwise lost jobs
nber.org/system/files/w…
This generally squares with my reporting, which showed a lot of takeup among companies that ended up laying off huge numbers of workers anyway:
propublica.org/article/this-c…
and that probably had ample access to other capital: propublica.org/article/the-go…
(But I wasn't able to empirically understand the scope of all the small businesses we heard about that were doing just fine and took the money anyway -- the lawyers and law firms and tech startups and construction companies -- which is why economics is rad)
Read 6 tweets
Dec 22, 2021
New from me: Remember spending last year trying to get a PCR test and then waiting days for results? Well, it’s not because rapid antigen tests didn’t exist. They were just muddling their way through a regulatory process designed for something else. 1/ propublica.org/article/this-s…
In March 2020, a small company that spun out of an MIT lab in 2018 to make rapid antigen tests for tropical diseases quickly adapted their technology to target Covid-19. Preliminary lab data showed that the prototype lateral flow test would at least catch superspreaders. 2/
But the FDA wanted to see clinical trials, so they spent months conducting one in Florida. The results ultimately came in close to the lab data: 80% sensitivity, with almost 100% detection of people with the most virus in their systems, and 94% specificity. 3/
Read 7 tweets
Nov 19, 2021
I keep thinking about this story as the bill is debated, because it is the purest distillation of what @jayrosen_nyu has called the "savvy style" of political journalism: Avoiding responsibility for having any moral values by reducing policy to a partisan catfight.
After reading the bill myself (), what struck me is that it's a collection of responses to specific problems that journalists have illuminated over the years: Maternal mortality, Turbotax fuckery, Indian Health Service neglect, rural doctor shortage, etc.
In an ideal world, Congress would legislate more thoughtful, targeted responses to those problems. Instead, because Congress barely functions, we throw money at them in the form of a massive budget bill *because it’s the only thing that can pass with a simple majority.*
Read 5 tweets
Nov 5, 2021
It's past 5pm on a Friday, so I've cracked a beer and started reading the reconciliation bill. It starts with the U.S. Forest Service, and I already like this thing rules.house.gov/sites/democrat… Image
Substantial civil penalties for unfair labor practices! That would be a game changer. Image
Expected stuff about child care, elder care, workforce development ... and I guess here's the climate conservation corps at $6.9b, lower than the $10b Biden asked for. grist.org/politics/aocs-… Image
Read 67 tweets
Nov 4, 2021
NEW from me and @ericuman: In which we try to figure out why it’s way harder and more expensive than it should be to get a rapid Covid test.

The answer comes down to having both too much government, and not enough.

propublica.org/article/heres-… 1/
The FDA has been making a ton of headlines lately as it authorizes vaccines for kids and boosters for adults. But do you ever hear about the FDA greenlighting Covid tests? Probably not, and that’s part of the problem. 2/
Since the beginning of the pandemic, FDA officials have been wary of rapid antigen tests, which are less sensitive than PCR tests. They’re worried about people getting false negative results right before they become infectious--but PCRs often take days to turn around. 3/
Read 8 tweets

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