Restaurants need the help of their customers, not more cash from Uncle Sam
After appropriating trillions of dollars in COVID-19 relief, Congress is angling to pass yet another multibillion-dollar aid package, this one directed at restaurants and other small businesses that suffered during the pandemic.
While we sympathize with all business operators who struggled to cope with COVID-19, another relief act for restaurants, bars and similar public venues is too much. The time for new federal cash outlays is over, and Congress (which has approved competing versions of the aid package in the House and Senate) needs to put a stop to this piling on.
For starters, the vast amounts doled out have kickstarted inflation, creating a severe and strikingly persistent threat to the economic recovery. Taming the upward spiral of prices is requiring aggressive intervention from the Federal Reserve to raise interest rates and sell its bond holdings, with all the inherent risks of recession. Shelling out new federal aid would only undermine that effort and make inflation harder to address.
Further, states and cities awash in federal money are free to approve more targeted aid, as Illinois did recently at the behest of the powerful local restaurant lobby. The Treasury Department is expected to distribute tens of billions in Fiscal Recovery Funds that were approved but haven’t yet been allotted, and the states receiving the money will have years to spend it. Many more billions from other programs also remain to be distributed.
Enough, already.
The Restaurant Revitalization Fund, part of the American Rescue Plan, succeeded in pumping money into a popular constituency but not the way Congress intended. Though businesses owned by women, veterans, minorities and those with lower incomes were supposed to get priority, mostly it was a chaotic free-for-all. Also, the amounts handed out were determined mainly by how much a company’s revenue had gone down year-over-year, which, contrary to the pro-worker intent of the measure, favored restaurants that stayed shuttered for the longest time. No wonder a slew of lawsuits have been filed.
Advocates say it’s only fair to add more money for restaurants that missed out on the first giveaway.
What about being fair to taxpayers who are stuck footing the bill for the myriad flaws in this relief effort, and others?
The Paycheck Protection Program, for instance, also misdirected aid on an even bigger scale. Millions of restaurants and other businesses took advantage of that program, collecting loans that supposedly would be forgiven if they used the money to retain workers. In short order, Congress weakened the requirements, so even companies that slashed their workforces will never pay back a penny.
Because the program was open to practically any small or mid-sized business, all sorts of companies collected funds, including those that didn’t remotely need it. Loose controls enabled grifters to make off with billions. A study by the University of Texas at Austin found that as much as 15%, a stunningly high percentage, was looted. As Justice Department Inspector General Michael Horowitz recently told NBC, “What didn’t happen was even minimal checks to make sure that the money was getting to the right people at the right time.”
These aid programs were a windfall for some and a disappointment to those who didn’t figure out how to work the system or applied after others had beaten them to it. Advocates for a new restaurant spending bill say that, in theory, part of it could be paid for with money recovered from chasing down fraudsters. That old political promise about paying for new spending by cracking down on the proverbial fraud, waste and abuse rarely comes true. We have no confidence a second restaurant-relief effort would be managed any better than the first.
Another consideration is that some restaurants, bars and similar venues have made a rapid comeback and their biggest problem is not so much a lack of customers as a lack of staff who want to work. Especially in places that had fewer closure requirements, it’s business as usual, more or less. In Chicago, where pandemic safeguards were onerous, many restaurants are still hurting. Inflation is making recovery even more difficult, raising the cost of food and labor to such an extent that menu prices can’t keep up.
If it were possible to effectively target government aid only to those businesses that need a little short-term help to get back on their feet, we’d be less adamant. But the restaurant business is notoriously risky. Even in favorable circumstances, some make a ton of money, while many fail. Trying to pick winners and losers from inside the Beltway doesn’t work, as the feds already have demonstrated.
In Chicago, some of the hardest-hit venues are in places such as the Loop, where working from home has cut into the usual customer base. That difficult business challenge won’t be cured with an extra one-time sprinkle of free government money. Businesses will have to figure out how to adapt.
The right thing to do is to turn off the federal spigot and go about supporting restaurants in the best way possible, if you can afford it: Be a loyal customer and leave a generous tip.