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This isn't the way the business rescue plan was supposed to work. Millions of small businessmen and women can't get to the front of the queue for desperately needed loans, while many healthy larger businesses are feeding at the trough and laughing at taxpayers all the way from the bank.
The small business rescue fund, the Paycheck Protection Plan, set up by Congress has already run out of the $350 billion thrown at it, and because of the flood of applications, some experts are now saying the cost of the program could double or triple to help small firms that need it.
For small businesses, revenues are their oxygen supply. Without customers and receipts, businesses die. They run out of money, have to go through bankruptcy, and then sell off their assets before they are carried away in body bags. They can't be resurrected like the biblical Lazarus at that point. Not only is that horrific for the people who put their lives and life savings into those enterprises, but it also means the workers won't have jobs to go back to when the economy is up and running.
TWhat went wrong? Along with economist Arthur Laffer and publisher and former Republican presidential candidate Steve Forbes, I was an enthusiastic supporter of a short term loan program with low interest rates to help businesses imperiled by the government-imposed lockdown to get through the next three to six months without having to close down. The key word here is LOAN -- which must be repaid.
The reason the system has broken down and exceeded all costs is the foolhardy idea of converting the loans into "grants" that don't ever have to be repaid to taxpayers. The loan becomes a grant if the firm doesn't lay off its workers. If you rehire laid-off workers before June 30 those employees count as fully employed.
What happened is that thousands of financially healthy businesses are getting loans of $100,000 to $3 or $4 million and they are pocketing the money. They weren't going to lay off workers in the first place.
Worse yet, the Washington Post reports that the feds won’t report which big companies are getting the taxpayer handouts. Maybe Congress doesn’t want these company CEOs to feel embarrassed. They should be.
I am personally getting calls from business executives asking: How do I get the free money? The PPP plan was supposed to prevent layoffs but thousands of these businesses weren’t ever going to give pink slips to employees.
Now small firms -- nurseries, restaurants, bars and shopping center stores have been crowded out. Many, perhaps millions of small businesses, will declare bankruptcy and Main Street America may never be the same.
Congress must fix this before it pumps hundreds of billions more into the Paycheck Protection Program with the money going to the wrong people. Make every business-large and small pay back their loans to taxpayers. Milton Friedman taught us “there ain’t no such thing as a free lunch.
There is also no such thing as a free loan.
Stephen Moore is a member of President Trump’s economic recovery task force and an economist at FreedomWorks.