Two years after COVID, was the $800 billion wage support plan worth it? | Health

Now, nearly two years after the program launched, what did taxpayers get 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 per job saved was high and most of the benefits accrued to the wealthy.

Nearly a year after implementing its $1.9 trillion coronavirus relief package, the Biden administration argues it made significant adjustments to the forgivable loan program, citing internal figures showing that poorer communities, ethnic minorities and the smallest companies received more benefits — those where the owner is the sole employee.

“The administration came into office with a huge focus on racial and social justice, and small business is an integral part of that,” said Michael Negron, the White House senior adviser on small business. “Entrepreneurship is important to our equity goals because it helps create generational wealth.”

But an outside study suggests the program — commonly known as PPP — was worryingly expensive per job saved, with payments mostly benefiting business owners who were best prepared for the pandemic. Overall, the study implies that only 23% to 34% of PPP dollars went to workers who would have lost their jobs, at a cost of up to $258,000 per job retained.

The conflicting views on PPP are part of a broader debate about how to help an economy in crisis. There is pressure to get the right amount of money out as quickly as possible without increasing inequality or triggering other forms of setbacks such as high inflation.

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

When MIT economist David Autor analyzed PPP with other economists, he saw too blunt a tool. Unlike Canada, the Scandinavian region, Portugal and Brazil, the US has never developed the data systems to monitor what is happening to individual companies’ payrolls. These systems would have made it easier to allocate money based on actual needs during a downturn. The US has failed to invest in its own data resources and has therefore been unable to target aid.

“The US instead ‘starved the beast,'” said the author. “The result is not less government. It’s just a less effective government.”

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

Black Americans make up about 12% of the US population, but control only 2% of private business wealth, which the Federal Reserve says is often key to moving up the economic ladder. Only 4.3% of all US household wealth is owned by Black Americans and 2.5% by Hispanic Americans, significantly less than their share of the entire US population.

When the Trump administration unveiled PPP in 2020, the full impact of the pandemic on the economy was just beginning to be felt. Due to the unpredictability of the situation, there was a race to get money out as quickly as possible, so the loans went through big banks, which, for the sake of convenience, often had existing relationships with suitable companies.

The program enjoyed bipartisan support, and then-Treasury Secretary Steven Mnuchin told a congressional committee in September 2020 that the payments had supported 50 million jobs. But as he pressed for additional help, Mnuchin said the most important thing during the pandemic is to get help “quickly.”

The need for speed also made access to the funds difficult for historically disadvantaged groups. That’s why the Biden administration changed policies and rules after taking office.

It set up a 14-day period in February 2021 during which only companies with fewer than 20 employees could apply for PPP loans. It changed the calculation of PPP loans so that sole proprietors, independent contractors and the self-employed could get financing up to their needs. Much of the lending was through community and minority-owned financial institutions.

As a result of the changes, PPP extended around 2 million loans to businesses in low- and middle-income communities last year, up 67% from a year earlier, according to figures provided by administration officials. There were 6 million businesses with fewer than 20 employees that received loans, a 35% increase from the program during the Trump administration.

As the administration targeted more businesses — including those where the owner was the only employee — the average size of a PPP loan fell. It averaged $42,500 last year, down dramatically from $101,500 in 2020.

“We inherited a program from the previous government that was riddled with injustices,” said Juan Guzman, the head of the Small Business Administration.

However, the author’s and other economists’ analysis states that the distributions “had no discernible impact on employment” during the Biden administration. endangered, there were fewer jobs to save.

Author estimates that the richest 20% of households took advantage of about 85% of the program. Biden’s changes might have made PPP fairer, but the proof won’t come until tax revenues arrive in the next few years, he said.

“They tried to be better administrators of the program, which was a luxury because the crisis wasn’t that urgent,” Autor said. “It’s not that PPP didn’t do anything; it has been a lifesaver for some small businesses and their creditors. It was also a staggeringly large donation from future generations of US taxpayers to some profitable corporations.