More people could be out of work soon because of misleading reports about America’s most successful economic relief program.
The Paycheck Protection Program was passed by Congress to provide businesses relief from the government’s economic shutdown. Over the past few months, the Treasury Department dispersed forgivable loans to 4.9 million businesses across America. The program ended up supporting businesses that collectively employ more than 51 million people during a time when most businesses faced deep declines in their cash flow. Without PPP, more people would be unemployed. But opponents of the program want you to believe that the program primarily benefited the wealthy. This is wrong, and their reporting can be harmful in an economic recovery.
Following the Treasury’s data dump of all the businesses that received a PPP loan greater than $100,000, both liberals and conservatives were quick to blacklist some of their favorite political targets for accepting funds, including the Catholic Church, restaurant chains, and businesses that have connections with the Trump administration.
No outside source has any direct knowledge of a business’s exact financial situation, meaning that they do not know which specific companies “deserved” a loan. A larger business could have seen a major reduction in cash flow because of the pandemic and could have been forced to lay off many workers or even close permanently. Granting businesses loans is a much better option than either of these two consequences, especially considering that it was the government that made these businesses close in the first place.
If the government takes your home through eminent domain, it has to compensate you. It makes sense that the government should do the same when it forces business owners to shut down.
Stories criticizing restaurants for accepting loans are especially ridiculous, considering that the restaurant industry was one of the worst-hit by the pandemic. According to one estimate, 85% of restaurants could go out of businesses by the end of the year. If anything, restaurants need more relief, but stories criticizing them make them more likely to return loans to avoid public backlash and reduce the chances of Congress authorizing more aid to businesses that need it.
Any claim that the politically connected somehow got preferential treatment for getting loans is impossible. The maximum amount a business could receive is 2.5 times its monthly payroll or $10 million, whichever is lower. This means that a business could not use its “political connections” to get more money than any other business. One media outlet has reported that Trump’s “friends and family” received $21 million in PPP loans. This is $21 million out of $521 billion in total money paid out — or 0.004% of the total. In other words, virtually all PPP money went to businesses with no connection to the Trump administration.
The Treasury Department should have never released the names and data of the businesses that received PPP loans. This move violated their financial privacy and provided no valuable information for improving the program. A giant list of PPP recipients does not help lawmakers determine if funds were well targeted, and it does not protect the program from fraud or abuse. All the data dump did was allow people to attack their favorite political targets for accepting funds. These attacks lead to public distrust of the relief efforts and likely reduce the possibility of reauthorizing the program if a second wave occurs, which would be catastrophic for the economy.
PPP is not immune from criticism, and there are ways to improve it. Businesses that have high overhead and rent costs did not receive much benefit from the loans, since at least 60% of the money had to be spent on payroll and not on these costs. These businesses need relief funds with fewer restrictions. Ways to improve the program will be learned from mediums such as congressional hearings and talking to recipient businesses, not from a data dump.
Articles that criticize specific businesses and industries for taking PPP loans is not good reporting. And if it continues, it could cost jobs and stall the economy as we attempt to climb out of this recession.
Travis Nix is a student of tax law at Georgetown Law. Follow him on Twitter @tnix113.
