The Payroll Protection Program amounts to one of the greatest government handouts in US history, essential as an economic parachute and yet stunningly indiscriminate.
Some businesses got a heap of government money they didn’t immediately need and others didn’t get nearly enough.
That is at least part of the story about the Payroll Protection Program rollout. At $659 billion, it amounts to one of the greatest government handouts in American history, essential as an economic parachute and yet also stunningly indiscriminate. Never before has so much government funding been so quickly spread around to small businesses — in this case, to help cover payroll costs during the coronavirus pandemic. The desperate and the prosperous alike eagerly lined up. When massive stimulus programs are rushed into creation, economic justice isn’t necessarily served. Everyone is served, or at least those with the wherewithal to obtain the funds. And it may have to be done again, since the first infusion will take many businesses only so far before they’re forced to fold. Something will have to give, and it probably will take the shape of another business stimulus.
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The PPP list helps answer the question: What does business really look like? We hear about public companies, startups, and large nonprofits that benefited. We patronize various retailers and restaurants (or used to). Yet this is only a small fraction of business activity. Some 18,200 businesses in Massachusetts qualified for at least $150,000; another 90,000 received less than $150,000. The PPP list reveals the connective tissue that holds the economy together: the wholesalers, the distribution firms, small construction companies, and small manufacturers.
To give you an idea, I typed “Patriot” into the Massachusetts PPP database, helpfully set up by The Boston Globe. There are 26 results, including: Patriot Recycling Corporation, Patriot Ambulance Inc., Patriot Plumbing & Heating Inc., Patriot Relocation Services Inc., Patriot Iron Corp., and One Patriot Place.
The last name is, according to business filings, a restaurant in Foxborough owned by well-known restaurateur Steve DiFillippo, known best for Davio’s. No industry has needed the money more than restaurants, yet the program has served as a buffer for all. Those savaged by the lockdown face the same loan forgiveness rules as those whose businesses remained steady or perhaps even improved. It’s an open question whether PPP will be enough of an infusion to keep the store or the restaurant alive. The funds basically amount to eight weeks of payroll and other expenses, helpful for some, but perhaps not enough to sustain businesses that have lost the bulk of their customer base and only now see it trickling back.
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The lopsided impact of PPP abounds. While headlines understandably emerged when Tom Brady’s TB12 fitness brand got PPP funds (somewhere between $350,000 and $1 million — Brady’s new contract pays about $1.5 million per game), joining Kanye West among high-profile recipients, there was no real disincentive to apply. Several dozen Massachusetts country clubs received PPP funds, reminding us that the well-heeled are entitled to a government bailout as much as anybody else.
The lure of the loan was a litmus test. Some of the larger law and CPA firms jumped at the money, fearing the worst in the midst of the shutdown. Others stayed away, perhaps believing there is no free lunch. But PPP may be the remarkable exception to the free-lunch rule. Although the PPP funds were technically termed loans, most businesses will not have to pay back much if any of the loan if they apply the funds properly and keep their job numbers steady.
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For many nonprofits that face declines in government and donor funding, the PPP was a lifeline. But some nonprofits are needier than others. It’s no small irony that Buckingham Browne & Nichols was among several elite private schools receiving a loan while public school systems across the Commonwealth sent out layoff notices — some 2,000 of them — in anticipation of budget shortfalls.
In business, it’s often about who you know. Those business owners without good banking relationships or the guidance of a knowledgeable accountant may so far have been left behind. The racial disparities on the PPP list appear to be immense: Most loan recipients did not identify their race, but even so, only 210 of some 112,000 Massachusetts recipients identified as Black, as the Boston Business Journal reported. Still, there is time to apply: PPP has been extended, and now the deadline is early August.
PPP avoided a near-term free fall, a panicked domino effect of job loss. But if the economy doesn’t spring back, even those that received “free money” may need it — and more — for the long haul ahead.
George Donnelly is a communications consultant and author of “The Boston Economy.”
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