With COVID-19 thwarting reopening plans, Washington eyes longer-term protection

WASHINGTON — U.S. officials have had an mantra for months, as they’ve weighed approving additional aid to address the country’s dual health and economic crises: The COVID-19 virus will dictate the economic rebound.

Last week, as new cases and hospitalizations surged across the country, pressure grew on Congress to draw up longer-term plans for an uneven recovery — or possibly the reversal of recent gains. In its clearest sign yet of ongoing economic pain, Congress unanimously agreed to extend by five weeks the $660 billion Paycheck Protection Program, which offers forgivable loans to small businesses.

The extension also gives lawmakers more time to hash out how to reform the small-business loan program that has epitomized the challenges of the mammoth government assistance effort spurred by the pandemic.

“While small business owners are guardedly optimistic about the economy re-opening, most also express concerns over the growth of case counts in Allegheny County and some other areas of the state,” said Gordon Denlinger, Pennsylvania state director for the National Federation of Independent Business, a small-business trade association that counts 15,000 members in the state.

“The COVID crisis has pushed business owners to the edge financially, and the vast majority will need additional support to make it through the months ahead,” Mr. Denlinger said.

In a national survey last month, the NFIB found 56% of members expected they would need as much as $50,000 more to support business operations in the near term, while 27% expected needing an additional $100,000 or more.

“The public health crisis will continue to impact many small businesses as restrictions on business operations and weak consumer spending will likely extend through the end of the year,” the survey stated.

That on-the-ground reality for many businesses has dashed hopes for a speedy recovery driven by consumers resuming their normal activities. A gradual lift of shutdown orders has caused a recent surge in COVID19 cases as people crowded bars, restaurants and beaches.

The rollbacks came swiftly. Allegheny County ordered bars and restaurants to stop selling alcohol at the end of June 30, just as the loan program was set to expire. California shut down bars and indoor dining, New York City paused restaurant reopening and Miami Beach reinstated a nightly curfew.

In the coming weeks, Congress’ decision on the small-business loan program will loom large as lawmakers consider extending unemployment assistance, sending more aid to state and local governments and offering more cash payments or “back-to-work bonuses.”

The program, originally drawn up in March, provided loans of up to $10 million to help small businesses cover payroll costs and other operational expenses during widespread shutdown orders.

The program confronted a litany of issues, ranging from technical glitches on the government’s online portals to banks approving loans for large, publicly traded corporations and leaving out mom-and-pop shops.

In late April, Congress

authorized a second round of funding after the first pot emptied in less than a month. Last month, lawmakers loosened some restrictions, allowing businesses to spend more of the loan money on non-payroll expenses like rent and utilities and allowing them to spend the loan money over a period of 24 weeks instead of eight weeks.

Still, the program expired on June 30 with more than $130 billion in loan money unspent, opening the door to repurposing the money. Last week, Congress unanimously revived the program by extending the application period until Aug. 8.

Even with employers adding 4.8 million jobs in June as shutdown orders were lifted, the unemployment rate in June was 11.1%, according to the U.S. Department of Labor’s jobs report last week.. And those numbers do not reflect the full impact of COVID-19’s resurgence toward the end of the month and into July.

Even before the surge in cases, many businesses — like minority-owned establishments — faced hurdles in obtaining loans. And businesses are still prohibited from using loan money to pay for inventory costs, personal protection equipment, and expenses around remote working.

In addition, many farmers have been deemed ineligible by the requirement that sole proprietors apply for assistance based on 2019 net income; that rule has excluded farmers who lost money in 2019 due to low commodity prices and a wet planting season.

Legislation introduced by Reps. Glenn Thompson, RCentre, and John Joyce, RBlair, would allow farmers to apply based on gross income, or sales before any deductions. “This is absolutely critical for their survival,” Mr. Thompson said in an interview.

The program has also come under fire from oversight officials in Washington.

Last month, the inaugural report from Pandemic Response Accountability Committee, a panel of inspectors general, warned that the program could allow money to go to borrowers who did not qualify for the program and result in unpaid loans.

The scale of the program and the speed at which the agency is working to process loans has also opened the door to potential fraud, the report stated.

Lawmakers introduced bills last week aiming to send the remaining PPP money more directly to small businesses that have seen major losses. Treasury Secretary Steven Mnuchin, testifying before a House Financial Services Committee, expressed openness for repurposing some of the remaining PPP funds.

“I … think that should be done and look forward to working with both the House and the Senate so we can pass legislation by the end of July,” Mr. Mnuchin said.

Senate Democrats have put forth the Prioritized Paycheck Protection Program Act, which would aid businesses with fewer than 100 employees that have lost more than 50% of sales. A Republican idea would allow larger businesses to apply while demonstrating economic harm.

Sen. Marco Rubio, R-Fla., the chairman of the Small Business Committee, told reporters he was in touch with the White House about new ways to get funding to businesses in under-served communities.

“Obviously, we’ll have to be more targeted at truly small businesses,” Mr. Rubio said. “Our hope is that we can use that as the sort of foundation for building a second round of assistance.”

Congress was set to leave Washington for the Fourth of July weekend, and both chambers will not return together for two weeks.