Last month, I wrote a piece here condemning the Trump administration for refusing to disclose the beneficiaries of bailouts authorized by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The following day, the Trump administration reversed course and promised to reveal Paycheck Protection Program (PPP) loan recipients.
On July 2, Trump proclaimed that PPP is “saving and supporting the jobs of tens of millions of American workers” and the program “has been a tremendous success, levels that nobody has ever seen before.” Treasury Secretary Steven Mnuchin boasted last month that PPP is “supporting an estimated 50 million jobs.”
We don’t need to worry because benevolent, damn-near-omniscient saviors will rescue the economy from the shutdown ravages that frightened and demagogic politicians have inflicted, right?
But the Trump team’s data is farcically inaccurate. Last month, the Small Business Administration, which administers the PPP, told the Associated Press that it was “too consumed by the urgent effort of helping small businesses through the economic downturn to provide” data on where the loans went. But the SBA has now specified how many jobs were retained for each PPP loan. While Congress slumbers, the Washington Post speedily crunched the numbers.
PPP loans – a.k.a. “Magic Beans” – are so effective that they saved more jobs than the total number of employees in at least 15 industries. Landscape architecture firms “retained 114,000 jobs — more than three times the number of people who worked in that sector in 2019,” the Post reported. The SBA also claimed that the PPP loans “preserved tens of thousands more jobs than are known to exist in other industry sectors,” including specialty food stores, cattle ranching, performing arts companies, corn and wheat farming, and fishing.
The SBA reported that a Washington state sprinkler system installer “retained more than 500 jobs” thanks to PPP but the firm has only 20 employees. A Georgia company that sells air guns and shipping bags was credited with saving 500+ jobs but has less than ten people on its payroll. Similarly, a Texas church was credited with retaining 500+ jobs – a true miracle, considering the church has only 12 employees.
Trump administration officials ignored plenty of warning signs of its “dumpster fire” bailout data. Wells Fargo issued almost 4,000 PPP loans and “every single applicant listed nothing in the jobs field, according to the SBA data,” the Post reported. Whatever.
According to a garbled email that an unnamed Treasury Department official sent the Post, the Trump administration concocted the 50+ million claim on PPP jobs based largely on the fat that “the average small business employee compensation for a 2.5-month period for 51 million employees totals approximately $520 billion.” Since the PPP has doled out more than $500 billion…. Voila!
There was never any reason to expect PPP to be anything except a train wreck. For decades, the Small Business Administration has consistently produced more boondoggles and scandals than any other (previously) half-pint federal agency. Thirty-five years ago, the Post described the SBA as a “petty cash drawer for members of Congress, who pop it open whenever they need a few dollars for the folks back home.” Congress made sure the COVID bailout package was written so that members of Congress could personally make out like bandits from the federal cash geyser.
Is the Trump administration relying on an Afghan model for responding to the pandemic? During the Obama administration, the Agency for International Development ludicrously evaluated its foreign aid programs in Afghanistan based on their “burn rate” – whether they were spending money as quickly as possible, almost regardless of the results. AID’s “burn rate” fixation produced endless absurdities, including collapsing school buildings, impassable roads, failed electrification projects, and phantom health clinics. Not surprisingly, vast Afghan corruption is the clearest legacy of AID’s “don’t ask, don’t tell” handouts. It would be naive to expect happier results from the SBA’s “spending so fast we can’t explain what we are doing” panacea.
Since the start of the pandemic, politicians have entitled themselves to inflict unlimited economic damage as long as they also shovel out almost unlimited handouts. PPP helps politicians shirk responsibility for the economic wreckage from sweeping shutdown orders with little or no connection to protecting public health. Political and bureaucratic dictates have helped bankrupt thousands of businesses since March. But since politicians are showering other businesses with handouts, it balances out, right? This is “macroeconomics justice” that ignores due process and fair treatment of individual Americans.
There is no reason to assume that Trump’s policies are better than his PPP data. Since the onset of the pandemic, both political parties and officials at all levels of government have often performed dismally. The biggest mistake Americans could make would be to permit politicians to absolve themselves now by giving away more of other people’s money.
Reprinted with permission from American Institute for Economic Research.
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