Show Me the Money: The Paycheck Protection Program

At part of two coronavirus relief packages, the Paycheck Protection Program has distributed the better part of $650 billion to “small businesses.” Yet a sizable portion of the money has gone to major corporations, including banks and large restaurant and hotel chains. We have seen this movie before with the bailouts in 2008. It is time to try a different approach, one that recognizes the needs of working and poor people.


 

On Friday April 24 President Trump signed into law a $484 billion coronavirus relief package. This latest bipartisan funding bill, comes four weeks to the day after the massive $2 trillion stimulus bill was signed into law. The bulk of the money in the second bill, $250 billion, provides small businesses with payroll support in the form of “forgivable” loans as part of the Payroll Protection Program (PPP). If the majority of the money is used to pay employee salaries, then the 1% loans are forgiven.  

The first stimulus package contained nearly $350 billion in similar payroll support for small businesses. The funds were dispersed by banks across the country acting as surrogates for the Small Business Association (SBA). The $350 billion was gone in less than two weeks. Some small businesses received the loans of course, but most did not. Non-profits, for example, who not only serve the most vulnerable of our citizens but also tend to operate on a shoestring, are typically left out of SBA loans. People convicted of felonies within the last 5 years were also not eligible, meaning that help was denied to “people trying to rebuild their lives, and [perhaps more importantly,] the employees who worked for them.” 

Apparently, some small businesses are more worthy than others. Businesses with political ties to the Trump administration and high-income private banking customers were much more successful obtaining PPP loans. JP-Morgan Chase, for example, awarded PPP loans to nearly every high-income private banking customer who applied, while only 6 percent of the 300,000 retail small business customers who applied were able to receive a loan. 

So far, the response from Washington seems like a sequel to the 2008 financial crisis, with bailouts for corporations and the wealthy and suffering for everyone else. The message is simple. Government works primarily for the rich and powerful. Even before the 2010 landmark supreme court case “Citizens United” that decided that corporations had the same rights as people, government had ceased functioning for the majority of its people.

Turning a deaf ear to the demands from working and poor people for universal healthcare, tuition-free college, and a universal living wage, our elected officials have instead given trillions of dollars in tax breaks and bailouts to corporations and the wealthy. It is this unequal distribution of government resources to the richest segments of our society that prompted Slavoj Žižek, in his 2008 book Violence, to coin the term “socialism for the rich.”

Clearly, it is time for a change. In the midst of this public health and financial crisis, Naomi Klein argues that doubling down on the same free market approaches that have historically proved so deadly for working and poor people is not a workable solution. She reminds us that “we are so much more interconnected to one another than our quite brutal economic system would have us believe.” 

 

D.B. Ruderman

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