Perils Of The PPP: Why Congress Must Get It Right This Time
It has been reported by the Associated Press that over 75 publicly-traded corporations applied for and received loans through the federal government’s $350 billion Paycheck Protection Program (“PPP”). Some of these companies are valued at over $100 million dollars. The PPP went into effect on April 3, 2020. By April 15th the funds were exhausted. Congress and the White House have reportedly reached agreement on a new bill to fund the rest of the “small businesses” that have applied for the loan. Let’s hope that this time around the PPP actually provides relief to the “small businesses” it was meant to target. I am skeptical, but it is more important than you may think that they get this right.
I am a solo legal practitioner. I am self-employed and I also hire independent contactors to assist me in my law practice. I have had to lay my independent contractors off. It was my understanding that PPP, and other elements of the CARES Act, such as the EIDL and new eligibility for unemployment, were supposed to help small businesses like me. I am not saying I am in dire straits. But I applied for all of the government assistance in the CARES Act and I have not yet received any of it. Meanwhile, Shake Shack already collected $10,000,000 dollars from the fund and then gave it back. Shake Shack’s applications were approved with stunning speed and efficiency. Probably because they are a multi-million dollar corporation that can pay an expert to get their application submitted within one hour of availability. Even when a law is meant to help small businesses, the large businesses win.
Ultimately, I will be fine. I work hard and have some money saved, but right now my income has almost completely dissolved. Courts aren’t having court and my practice in criminal defense and family law is dependent on a steady stream of trials and hearings. But there are millions of other small businesses out there that need the money now. A hot dog shop in Pittsburgh that was an icon of the city recently closed. Restaurants and thousands of other business-types have been devastated by the shutdown.
Meanwhile, our leaders in Washington bickered over fine details of the second round of funding, they sent the majority of the original money to Washington D.C. and more than 75 publicly traded corporations have benefited from PPP money. The second round of PPP funding should prioritize businesses with less than 10 employees or it should be randomly distributed as Mark Cuban has advocated. The first round was on a “first-come, first-served” basis and it greatly favored multi-million dollar corporations who could fill out an application instantly. A Mom-and-Pop store owner may take a few days or weeks to complete such an application.
I believe it is very important that Congress and the President get this right. A mishandling of the PPP, and the stimulus overall, could lead to significant backlash down the line. Media is already hammering the program for benefiting large corporations first. This reminds me of the market crash and Great Recession of 2007. The economy went into the tank and the Troubled Asset Relief Program swooped in to rescue Wall Street with $431 billion in loans. Meanwhile the total of stimulus checks sent by the federal government to individuals topped out at $152 billion.
The U.S. economy eventually recovered. But the perceived inequality created by the government response to the Great Recession eroded trust in the government tremendously. It only served to reinforce the already popular perception that the government favors the rich over the poor. The implementation of TARP, failure of the government to greatly assist individuals and the depth of the crisis from its outset, is one of the primary reasons that populist anger manifested in the late 2000’s and 2010's. This populist wave has affected both the left and the right side of the political spectrum, with Bernie Sanders and the rise of Donald Trump. I would also argue that much of this anger helped propel Barack Obama, a relative political newcomer, and the first African-American president, to heights not imagined before.
I am not here to argue the merits of the Obama or Trump presidency. I am here to argue that the government’s unequal responses to major disasters can have consequences for years to come. And those consequences could lead to instability and they may not manifest themselves right away. It is not hard to picture a radical presidential candidate in 2024 railing against the federal government’s unfair distribution of the CARES Act funds. Just as politicians railed against TARP and the government’s handling of the Great Recession. Remember Ron Paul? The time is now for Congress and the President to get this right. They need to make sure the stimulus happens quickly enough, provides enough money and hits the targets that the government lays out. Otherwise, it is very possible that it could lead to instability and anger amongst the public that will have consequences in American politics for decades.