by Las Vegas Review-Journal Editorial Board, February 11, 2022
One aspect of daily life the coronavirus couldn’t disrupt was the government’s ability to waste money.
Last month, the National Bureau of Economic Research released a new working paper examining the Paycheck Protection Program. Congress passed the measure early in the pandemic and provided additional funding in later bills. The program eventually handed out around $800 billion in low-interest loans. Most of the loans will be forgiven. The goal was to keep workers employed as the government mandates ground the economy to a halt.
The program was successful in one respect. The study found that 93 percent of small businesses ended up receiving at least one loan. “Free” money is a popular product.
But it was much less successful at actually saving jobs. The authors found that the program cost $170,000 to $257,000 per job-year retained.
“These estimates imply that only 23 to 34 percent of PPP dollars went directly to workers who would otherwise have lost jobs,” the authors write. “The balance flowed to business owners and shareholders, including creditors and suppliers of PPP-receiving firms.”
Further, “about three-quarters” of PPP funds accrued “to the top quintile of households.” In other words, the rich got richer.
Then there were the organizations that shouldn’t have received money in the first place. In a recent report, the Freedom Foundation found that labor unions raked in tens of millions of dollars despite not being eligible for the loans.
“Of the 226 loans identified by the Freedom Foundation’s analysis, the largest by far was the $6.4 million loan provided to the Michigan Education Association,” Maxford Nelson, the group’s director of labor policy, writes. “Not only were the unions ineligible for these funds, but they had little need for them. The federal government allocated nearly $200 billion to public schools to help them weather the pandemic and keep staff on payroll — and paying union dues.”
The authors of the paper blame the waste on the country’s lack of bureaucracy. “PPP was essentially untargeted because the United States lacked the administrative infrastructure to do otherwise,” they write.
The PPP was defensible at the time. The government actively pushed to shut down the economy. The experts assured the country we needed “two weeks to slow the spread.” When the government forces a business to close, there’s a strong argument that’s a de facto taking and compensation is appropriate.
But the Paycheck Protection Program was supposed to help the employers and employees devastated by that action. Instead, we ended up with welfare for the wealthy and well connected. Not quite what the politicians promised, but it’s what we and our grandchildren will be paying for.