Did the Pandemic PPP Loan Plan Really Work? We still don’t know: NPR

A closed sign is displayed in a business window in near-deserted Lower Manhattan on April 17, 2020 in New York City. Many small businesses benefited from a government emergency loan program during the pandemic, but its effectiveness is still in doubt.

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Spencer Platt / Getty Images

A closed sign is displayed in a business window in near-deserted Lower Manhattan on April 17, 2020 in New York City. Many small businesses benefited from a government emergency loan program during the pandemic, but its effectiveness is still in doubt.

Spencer Platt / Getty Images

When the pandemic struck last year, Andrew Leckie, who runs half a dozen restaurants and a catering business in Edmonds, Wash., Was forced to lay off more than 200 employees.

Demand for his oysters and craft cocktails had dried up and his businesses were struggling until a program to provide loans to small businesses like his came to the rescue.

“I don’t think we could have withstood the financial challenges that existed without this money,” Leckie says.

Taking advantage of loans from the federal government‘s Paycheck Protection Program (P3), it has been able to gradually rehire about three-quarters of its workforce.

The Paycheck Protection Program, first enacted at the start of the pandemic as part of the CARES Act, aimed to provide loans to help small business owners like Leckie keep their employees on the payroll. . Businesses would not have to repay their money as long as they used most of the loan proceeds to pay staff.

But despite many successes like Leckie’s, there is little consensus on how many paychecks he has actually protected, a question that persists as the PPP must go out of business in the weeks to come after it runs out. all its funds available.

The program, after several extensions passed by Congress, guaranteed more than $ 10 million in loans to small businesses during the pandemic at a cost of over $ 770 billion to date.

The Small Business Administration oversaw the program and the initial demand was huge. The first $ 350 billion congress set aside for loans was clawed back in less than two weeks.

But he was hit with controversies from the start. People were outraged when rich, well-connected outfits like the Shake Shack burger chain and the Los Angeles Lakers basketball team got loans, while others were left out. Some large borrowers were ashamed to return the money.

The Ministry of Justice has also provided over 100 criminal cases alleging fraud against the program. In its effort to get money out quickly, the Small Business Administration approved over 2 million loans which were later flagged as potentially problematic.

“The scale of this program is so beyond anything the Small Business Administration has had to perform before, it’s mind-boggling,” says Sean Moulton of the Project on Government Oversight watch group.

“How well has that worked? I don’t think anyone has a good answer to that question,” he adds.

Economists also raised the question of whether the loans actually kept workers at work or simply subsidized businesses that would have been opened anyway.

“We have really underestimated the ability of many non-face-to-face service companies to not only continue to do what they do, but even do more,” says economist John Friedman of Brown University. “As a result, a lot of the PPP money went to companies that were actually not really affected by the pandemic.”

Friedman and colleagues estimate that in its first four months, the loan program actually saved only about 1.5 million jobs – at a cost of approximately $ 377,000 each.

Michael Faulkender, who, as the Trump administration’s Assistant Secretary of the Treasury for Economic Policy, helped shape the loan program, argues that it played a much larger role in helping to save . more than 18 million jobs during his first months.

“I think compared to how devastating things could have been, PPP has been a tremendous success,” says Faulkender.

Faulkender argues that without the loan program, even more people would have been plunged into the unemployment system, which was already overwhelmed by millions of workers made redundant in search of benefits.

A Federal Reserve survey last year found that 82% of small employers applied for a P3 loan and 77% of those who applied received all the money they asked for. Almost half of these companies were further reducing the number of workers they employed.

But layoffs were even more common among companies that did not get PPP loans. In addition, employers who obtained a loan were more likely to rehire laid-off workers.

Faulkender points out that the program was originally designed as a sort of economical lifeboat – to keep workers and businesses afloat and together during what was to be a brief stoppage, lasting perhaps two months.

Of course, the pandemic dragged on much longer than that, but despite the doubts, there are many success stories.

Andray Hall is issuing a PPP loan to keep his New Jersey kitchen cabinet company afloat at a time when no one wanted strangers to take action inside their homes.

“For me, it’s about the people,” Hall said. “The business, we can survive it, but the people, if they fall, it’s hard to get up.”

Or take Leckie. His business partner improvised a take-out menu that included barbecue and fried chicken. They added outdoor verandas to restaurants, with plastic wind and rain protection.

And after taking advantage of two rounds of PPP loans, he’s still in business.

“I just feel like it’s a blessing that we can still be standing today,” he said. “And I think the PPP played a big role in that.”

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