Problems with the small business loan program show the need for a paycheck guarantee program
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We are facing an economic and public health crisis of epic proportions. Millions of people are going into their third month without a paycheck. The vast majority have not received any relief—some may not get stimulus checks for another 20 weeks and some may not get them at all. Bills are piling up and people are petrified that their family members will fall ill. Meanwhile, essential workers are still going to work, afraid of getting sick themselves because there is no testing protocol.

More than 40,000 people have died. Twenty-two million Americans have filed for unemployment in just the past month, and an estimated 35 million will lose health insurance when they lose their jobs—right in the midst of a massive public health crisis.

Congress has provided trillions in funding to address this crisis, and this week we are set to vote again to provide an infusion of cash to fund the Paycheck Protection Program (PPP). While PPP includes good ideas to keep small businesses afloat, it has become clear over the past several weeks that the program is structurally incapable of efficiently and quickly delivering the scale of relief we need or stopping mass unemployment. The vast majority of unbanked small businesses as well as minority-owned businesses have been disproportionately excluded. Even businesses that have been approved for loans are reportedly not accepting them because they have no assurance those loans will be forgiven.


We must think differently and recognize the urgency and the magnitude of what we are facing right now. Public health and economic health are tied together: to beat the virus and stave off future waves of reinfection, we need to keep people home until we expand testing. If we are going to keep people home, we need to keep people tied to their employers and receiving paychecks so workers can stay home and businesses can stay shuttered until necessary testing and public health protocols are in place to keep us all safe.

That’s why I have proposed that Congress immediately implement a federal paycheck guarantee for businesses of all sizes, nonprofits, and state and local governments. My Paycheck Guarantee Act would stop mass unemployment (and would apply retroactively to pull people back off unemployment) and keep businesses from going under by guaranteeing paychecks up to a salary cap of $100,000, covering benefits including health care, and providing up to 25 percent for maintenance costs like rent and utilities. The proposal would be scalable to the degree of revenue loss, so that businesses that have 70 percent revenue loss would receive 70 percent of the grant amount. This allows for real flexibility to reopen partially, if public health guidance requires it, and to even re-shutter if second or third waves of infection hit a business or community. And instead of using a network of banks or sending people to navigate multiple systems like unemployment insurance, Medicaid or other safety net programs, the Paycheck Guarantee Act would include a streamlined process that utilizes already filed paperwork to determine the grant amount—and then sends checks straight from Treasury or through payroll processing companies to the employer.

Keeping employers connected to workers has numerous benefits for both workers and businesses. It will ensure employers of all sizes have sufficient funds to weather the crisis and without having to rehire and retrain workers. They are able to keep employees on their health care plans and other benefits. And the funds are distributed as a grant, not a loan, with automatic stabilizers built in to continue the program until certain economic triggers are reached. Small businesses and the unbanked do not have to worry about competing for a bank’s attention and can instead get direct relief with minimal paperwork or bureaucracy. Workers can have the security of their regular paycheck, benefits and their job—and they can at least maintain a level of stasis in paying rent and putting food on the table.

Some may worry about the cost. However, according to a cost and savings analysis by Mark Zandi at Moody’s Analytics, my Paycheck Guarantee Act could provide relief to millions more for just $506 billion over six months—given the savings of not sending people to unemployment insurance, Medicaid or investing in extremely expensive insurance subsidies to cover health care.

In two short weeks, we have invested $349 billion to help 1.6 million small business owners—just 6 percent of small businesses. Investing another $400 billion into the PPP program that has tremendous issues around its structure and limitations is not a smart investment of taxpayer dollars. It will not fix the problem of mass unemployment nor will it deliver the kind of quick and expansive relief we need to deliver to workers and businesses across the country. For almost the same amount of money, we can use the Paycheck Guarantee Act to deliver quick streamlined relief. That’s why the proposal has attracted the broad support of former Federal Reserve Chairwoman Janet YellenJanet Louise YellenGOP governors move to cut unemployment benefits as debate rages over effects Judge rejects GOP effort to block tax provision in Biden stimulus bill Growing inflation is Biden's hidden tax on working Americans MORE, Nobel prize-winning economist Joseph Stiglitz, and numerous union leaders and business associations.

We are running out of time. If this downward spiral continues, it will be extremely difficult to climb out for a long time. Mass unemployment is a policy choice and countries like Denmark, Germany, and France have chosen differently. We can choose differently as well, if we act boldly and swiftly by passing the Paycheck Guarantee Act.

Pramila JayapalPramila JayapalBiden spending plans hit speed bumps Overnight Health Care: CDC approves Pfizer vaccine for adolescents aged 12-15 | House moderates signal concerns with Pelosi drug pricing bill | Panel blasts COVID-19 response House moderates signal concerns with Pelosi drug pricing bill MORE represents Washington’s 7th District and is Co-Chair of the Congressional Progressive Caucus.