Since March 1, 66,000 or so businesses in the U.S. have permanently closed, according to data from Yelp. And in the last two weeks of June, those permanent closures were happening at a higher rate than in the previous three months. Harvard researchers think it's even worse than that, estimating about 110,000 business had folded by early May. It's clear that what Congress has done so far to keep businesses afloat, largely the Paycheck Protection Program (PPP) in the March CARES Act relief bill, is not working across the board. (Disclosure: Kos Media received a Paycheck Protection Program loan.)
Restaurants and retail businesses, led by beauty supply stores, have been hit the hardest. Where the government could have stepped in by subsidizing payrolls to make sure that businesses could stay solvent for the duration and people wouldn't feel forced by imminent financial ruin to prematurely reopen, it didn't. It did create a cumbersome loan program with confusing rules that even the banks, which have made billions off of the loans, have had difficulty navigating. Many in the banking community are advising that PPP be scrapped in favor of straight-up grants.
One of the major initial problems for small business owners is that the loans could only be forgiven if they paid employees for eight weeks—we're months into the crisis now with no end in sight. Though the rules were loosened eventually, plenty of owners couldn't take on more debt when it became clear the crisis was going to continue. Many didn't want to pose a risk to their staff or to customers even when they could reopen, if they didn't think they could do so safely. Some, like Mick Larkin, who owned a karaoke club in Wichita Falls, Texas, tried to reopen only to have to close again when the virus came roaring back to life after reopening. "We did everything we were supposed to do," Larkin told the Times. "When he shut us down again, and after I put out all that money to meet their rules, I just said 'I can't keep doing this.'" Reopening should not have happened. Reopening should not have had to happen because money is cheap enough right now for the federal government to have kept everyone afloat and home safe, flattening the infection curve of the virus.
There's all this evidence that the aid didn't go where it was most needed and hasn't done the job for tens of thousand of businesses. There're also serious problems with the reporting of where the aid did go, Bloomberg news finds. For example, accountant Herb Miller in Hixson, Tennessee was listed in the Small Business Administration's (SBA) release of PPP data as being approved for as much as $5 million in loans. He is a one-person business, and only got $3,700. The limit for a one-person shop is $20,833. "Something is screwed up there," Miller told Bloomberg. "I'm going to have to get this straightened out." The data from SBA is really wonky. Despite the limit on one-employee loans, the SBA lists more than 75,000 loans for single employee enterprises that have higher amounts, and 154 of them are listed as having received $1 million or more.
And this: "Out of almost 4.9 million loans, the number of 'jobs retained' is zero for 554,146 and blank for 324,122. Seven loans list negative job numbers." It gets worse. There are almost a thousand entries that show businesses with 500 jobs getting loans under $150,000. The loan amounts were supposed to be 2.5 times a firm’s average monthly payroll. In more than 200 of these cases, the monthly salary per employee would work out to be $4 as reported. Which makes no damn sense. Is the SBA even trying to keep track of any of the billions that have gone out the door?
"We are spending, as American taxpayers, upwards of half a trillion dollars to purportedly help small businesses stay afloat," said Kyle Herrig, president of Accountable.US, a government-watchdog group. "We should know where the money went, how many jobs were saved, and right now with the data, we don't have that ability to say with any certainty." Confirming that, Bloomberg says, reporters spoke with more than a dozen companies that were reported to have received more than $1 million and just one job retained. "The borrowers all said there were mistakes in the dataset," Bloomberg reports. A Miami architect, Frank Demandt, received $19,700 for his four employees. His bank confirmed that. He's listed as receiving more than $1 million.
Bird Rides, Inc., a scooter-rental service, is listed by the SBA as receiving a loan, but it didn't even apply for one. Bridget Ottoh, who owns Ottoh Group in Mt. Juliet, Tennessee applied for a loan but withdrew the application before it was processed. "I actually never received a PPP loan," Ottoh responded when learning that the business was listed as having been approved for a $2-$5 million loan.
"This whole thing is a farce," Miller, the accountant who got $3,700, said. It's a farce that apparently everybody in government wants to keep pouring money into. It's not working for tens of thousands of businesses. It would make far more sense—and save a lot of money—for the businesses that can't continue to operate in the pandemic to have grants to cover expenses. It would make far more sense to have every person getting ongoing $2,000/month minimum payments so that they could afford to live, be at home safely, and be ready to start reviving the economy just as soon the virus is under control. Or it would have made sense four months ago. This far into the crisis, so much damage is already done it's hard to see a way out.
But the way out isn't doubling down on this problematic loan program. It's done what it could and it's very much time to move on to really rescuing people and the economy by just giving everyone money.