As the pandemic was entering its sixth month in September 2020, the Select Subcommittee on Coronavirus Crisis, which is comprised of Republicans, released an abridged version. ReportOn the introduction of the Paycheck Protection Program.
The program was among the most expensive of the pandemic relief measures passed in 2020, eventually growing to some $800 billion, making it among the most expensive government programs of 2020—nearly equivalent to the size of the American Recovery and Relief Act (ARRA), also known as theObama’s 2009 stimulus package was passed. It was a huge economic rescue program, even without the other pandemic relief funds.
According to the GOP, the PPP was described as “a forgiveable loan program that encourages small business owners to retain their employees on the payroll”. In other words, it was intended to save the jobs of ordinary workers, and the report—essentially an extended brag sheet—insisted that it had done precisely that, crediting then-President Donald Trump for its accomplishments. The report stated that the program’s emphasis on getting money to workers saved many millions of jobs, and prevented the economy from collapsing. The section titled “President Trump’s Swift Action Provided Relief” is one.
The subcommittee’s Democrats argued that program which passed bipartisanly needed greater oversight. However, they credited the program with helping millions of small businesses and non profit organizations to stay afloat in the coronavirus crisis. Steve Mnuchin, then-Treasury Secretary, repeatedly supported the program before Congress and the media. In the GOP Report title, PPP is referred to as “Resounding Success”.
The more exact description might have been: “Expensive Failure.”
Recent StudyAccording to the National Bureau of Economic Research, the NBER found that the vast majority of funds used by the program were spent by shareholders and business owners. “Only 23 to 34 percent” of program’s funding went to employees who were at risk of losing their jobs. The jobs it did keep in place were preserved at very high cost—somewhere between $170,000 and $257,000 a year, far more than the typical earnings of affected workers, which are closer to $58,000 per year.
The PPP saved some jobs but at very high costs. However, overall the result was exactly the opposite of what it intended. This program’s purpose was not to make money for business owners but to save the jobs of wage workers. David Autor is an economist at the Massachusetts Institute of Technology and was the principal researcher on the paper. Submitted The New York Times recently, “It turns out [the money]The money didn’t go to only workers that would lose their jobs. The money went to the business owners, their shareholders, and their creditors.” He added that the program was extremely regressive.
There are several possible reasons why the program did not produce expected results, according to authors. It was designed in haste at the beginning of the pandemic when many—including lawmakers and policymakers—believed that it would be a relatively short affair, and the economy would fully bounce back by summer. Initially, the PPP would refund loans to small businesses that retained workers on payrolls for at least eight weeks. It was essentially turning those loans into grants. The requirements for the PPP changed over time as more funds were added to the program. In the end, it became a federal slush fund that was all-purpose and available to small businesses.
PPP’s poor design resulted in poor performance. Although it can be useful to examine and learn from flaws in programs such as this, my opinion is that we should just strive to make better programs in the long-term.
Although there were many reasons the program was not designed well, the main problem is that no one, particularly Congressmen, really understood the nature of the pandemic and its impact on the economy. The PPP and the other COVID-era relief programmes were crafted in hasty fashion based on political agendas, inadequate projections, partial information, wishful thinking, and partisan goals.
It’s not the best way to design effective relief programs. This is precisely why Obama’s stimulus package was created. These same failures and flaws plagued many other people.. Massive emergency relief programs designed quickly are subject to such pressures, and they will likely fail.
This is not an excuse for policy despair. It’s an opportunity for policymakers to be more cautious and humble, particularly in the face or a new emergency. Instead of throwing money at it poorly constructed mega-programs like the PPP and ARRA, smaller, more targeted programs—like Operation Warp Speed, which was probably the biggest success of the pandemic but cost just a few billion dollars—are much more likely to result in something that resembles a resounding success.