Accessing worth of $800B payroll aid plan

One study says expensive, owners got the benefit

WASHINGTON » President Donald Trump rolled out the Paycheck Protection Program to catapult the U.S. economy into a quick recovery from the coronavirus pandemic by helping small businesses stay open and their employees working. President Joe Biden tweaked it to try to direct more of the money to poorer communities and minority-owned companies.

Now, almost two years after the program made its debut, the question is what taxpayers got for the $800 billion. The Biden administration says its version of the program helped prevent racial inequality from worsening, while a prominent academic study suggests the overall price tag was high per job saved and most of the benefits accrued to the affluent.

Nearly a year after the implementation of its $1.9 trillion coronavirus relief package, the Biden administration is arguing that it made critical adjustments to the forgivable loan program, pointing to internal figures showing that more benefits went to poorer communities, racial minorities and the smallest of businesses — those in which the owner is the sole employee.

“The administration came into office with a big focus on racial and social equity, and small business is a significant part of it,” said Michael Negron, the senior White House adviser for small businesses. “For our equity goals, entrepreneurship

A notice of closure is seen on a business in 2020in Grosse Pointe Woods, Mich.

is important because it helps create generational wealth.”

However, an outside study suggests that the program — commonly known as PPP — was troublingly expensive per job saved and the payments mostly benefitted business owners who were best prepared to weather the pandemic. On the whole, the study implies that just 23% to 34% of PPP dollars went to workers who would have lost jobs, at a cost of as much as $258,000 per job retained.

The conflicting views of PPP are part of a broader debate over how to help an economy in crisis. There are pressures to get the right amount of money out as fast as possible without driving more inequality or triggering other forms of blowback.

Across two presidencies, Congress approved an unprecedented $5.8 trillion in relief spending that included new interventions such as forgivable loans, direct payments and an expanded child tax credit that was deposited into people’s bank accounts.

When MIT economist David Autor analyzed PPP with other economists, he saw a tool that was too blunt. The U.S. never developed the data systems to monitor what was happening to individual businesses’ payrolls, unlike in Canada, the Scandinavian region, Portugal and Brazil. Those systems would have made it easier to allocate money based on genuine need during a downturn. The U.S. failed to invest in its own data resources and could not target the aid as a result.

“The U.S. has instead ‘starved the beast,’” Autor said. “The result is not less government. It’s simply less effective government.”

By changing the PPP program’s guidelines, the Biden administration was trying to prevent the pandemic from further widening the country’s racial wealth gap.

Black Americans make up about 12% of the U.S. population, yet they control just 2% of the assets from private business ownership that are often key for ascending the economic ladder, according to the Federal Reserve. Just 4.3% of total U.S. household wealth belongs to Black Americans and 2.5% to Hispanic Americans, significantly below their share of the total U.S. population.

When the Trump administration unveiled PPP in 2020, the full impacts from the pandemic were just beginning to be felt in the economy.

There was a race to get money out as quickly as possible because of how unpredictable the situation was, so the loans went through major banks that often had existing relationships with eligible businesses for the sake of expediency.

The program enjoyed bipartisan support and the treasury secretary at the time, Steven Mnuchin, told a congressional committee in September 2020 that the payments had supported 50 million jobs.

THE ASSOCIATED PRESS