‘They aren’t American’ — Democrats aim to block aid to struggling cruise companies

Bailout opponents cite loophole allowing industry to avoid U.S. taxes, regulations

House Transportation Chairman Peter DeFazio, D-Ore., speaks to a reporter in his office in the Rayburn House Office Building on Oct. 23, 2019. (Bill Clark/CQ Roll Call file photo)
House Transportation Chairman Peter DeFazio, D-Ore., speaks to a reporter in his office in the Rayburn House Office Building on Oct. 23, 2019. (Bill Clark/CQ Roll Call file photo)
Posted March 12, 2020 at 6:22pm

As the travel industry reels from the coronavirus pandemic, President Donald Trump has suggested some sort of federal help for the travel industry, specifically singling out the cruise line industry as one that might need help.

But multiple Democratic lawmakers are cool to the idea, saying it makes little sense to bail out an industry that does not pay most of the applicable U.S. taxes and is not subject to more strict U.S. employment and regulatory requirements.

“They aren’t American,” said Rep. Peter A. DeFazio, D-Ore., chairman of the House Transportation and Infrastructure Committee. “They don’t pay taxes in the United States of America.”

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“I would oppose a bailout for the cruise industry,” said Sen. Richard Blumenthal, D-Conn., who has introduced a bill aimed at guaranteeing adequate medical personnel and legal authority on cruise ships. Rep. Doris Matsui, D-Calif., has introduced a House version of the bill with crime on cruise ships in mind. 

“I think they have to earn any sort of economic assistance, and there’s no reason to focus on one industry. It ought be an economywide approach,” Blumenthal said.

And Rep. Tulsi Gabbard, D-Hawaii, sent a letter to Trump on Thursday calling for a temporary suspension of all cruise line operations nationwide until all people on board could be tested for the virus.

“It is imperative that the cruise ship industry in the United States halt all service to prevent community spread for the foreseeable future,” she wrote. “We cannot afford to let cruise passengers risk infections in our country, causing mass exposures in our communities or risking another cruise ship being quarantined at sea.”

Most cruise lines are still sailing, although business plummeted last week when the State Department and Centers for Disease Control and Prevention took the rare step of urging U.S. citizens, particularly those with underlying health conditions, to avoid travel by cruise ship.

But on Thursday, Princess Cruises, which saw two ships quarantined in Japan and California since the beginning of the year, announced that it would voluntarily pause global operations of its 18 vessels for two months, impacting voyages departing March 12 to May 10. Those currently on board a cruise that will end in the next five days will finish up their cruise.

“Don’t get on a cruise ship,” Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases, told NBC viewers Sunday.

[Capitol comes under microscope even with new coronavirus guidelines]

It was harsh advice for an industry that some 32 million people were projected to avail themselves of this year, according to data from the Cruise Lines International Association, which did not return two emails seeking comment this week. 

The association responded to the crisis by implementing a series of steps intended to keep cruises safe, including denying boarding to those who had traveled via airports in South Korea, Iran and China and screening passengers who had visited high-risk countries.

Most major cruise lines that sail out of the United States use a loophole in maritime law that enables them to register their individual ships under foreign flags, including countries such as Liberia, the Bahamas or Panama. The loophole means ships escape higher U.S. taxes as well as more stringent employment and safety laws — an issue that has become problematic when, for example, a crime is committed on board.

Before he retired from the Senate in 2015, Democratic Sen. John D. “Jay” Rockefeller IV sought to close that loophole, arguing that it allowed the industry a worldwide tax rate of just 1.3 percent on more than $17 billion in profits.

[Lawmakers criticize cruise lines over coronavirus refunds]

Even as they’ve escaped U.S. taxes, Ross Klein, an international authority on the cruise ship industry who now serves as interim dean and professor in the School of Social Work at St. John's College in Newfoundland, Canada, said the industry has leaned heavily on U.S. services, relying on the Coast Guard to provide medical evacuations when people become ill or go overboard. The latter, he said, costs about $1 million. “They don’t pay a penny of that,” Klein said.

But Klein said he has no doubt that the industry will be among those asking for a bailout, though Treasury Secretary Steven Mnuchin said Wednesday any aid would likely come in the form of a loan guarantee. 

“Of course they’ll take the money,” he said.

Lawmakers who represent cruise industry workers — such as Rep. Donna E. Shalala, D-Fla., whose district employs 150,000 people associated with the industry — say the industry has yet to make a specific request for help, though it's clearly hurting. 

Blumenthal said his resolve to crack down on the industry became deeper in the aftermath of the coronavirus quarantine.

“What these cruise ships face is a medical crisis they’re totally unprepared for,” he said.