Think small business relief was a ‘Success’? Ask businesses in communities of color
With coronavirus cases surging and a long winter ahead, many businesses are worried they won’t survive past the holidays. But if one thing is clear at this point in the pandemic, it’s that President Trump and his allies in the Senate have turned their backs on too many small businesses, workers, and their families.
We all have our favorite restaurants and mom-and-pop corner stores that make our neighborhoods feel like home. In the absence of federal support, we’ve watched as many have been forced to close for good. With Congress hoping to finalize a new COVID relief bill, America’s entrepreneurs deserve a program that prioritizes actual small businesses and their workers. A new round of funding must serve those in greatest need and is transparent and accountable from the start. That’s going to require acknowledging the many flaws with this program and working hard to fix them.
The Trump administration billed the Paycheck Protection Program (PPP) as a way to help small businesses keep operations running and employees on payroll. Unfortunately, it missed the mark. Due to the poor design and disastrous implementation of the program, it quickly turned into a pandemic piggy bank for big businesses, the rich and well-connected. Fraudsters easily accessed the funding ahead of deserving small businesses, some of which had to close as a result.
This was a taxpayer funded bonanza for the rich and powerful. And we only know all of this because watchdogs and the American public demanded greater transparency, and journalists sued to access the PPP loan data.
Here’s what we have found out about PPP: fraudsters took advantage of the program‘s scant oversight measures. Big businesses like Ruth’s Chris Steakhouse and Potbelly’s, celebrity millionaires like Kanye West and Tom Brady, even businesses associated with members of Congress and the Trump administration got their hands on these funds; some, like Ruth’s Chris, subsequently repaid the money. All the while, too many small businesses across the country struggled to get any help at all.
The program offered a leg-up to some while leaving many in communities of color behind, exacerbating both the effects of the pandemic and the economic inequality that existed before the public health crisis began. One study estimated the Trump administration denied up to 90 percent of businesses owned by people of color or women access to PPP funding. Another found that only 12 percent of Black and Latino business owners who applied for SBA relief got the help they requested.
An Accountable.US analysis from this summer showed that the ten congressional districts with the highest percentage of Black residents got nearly $13 billion less in PPP funding than the ten districts with the lowest percentage of Black residents. Without fixes to the program, there is no reason to believe the next round of loans will go any differently, and too many businesses in communities of color will be denied access to this funding.
On top of all this, the program has been remarkably inefficient. According to MIT, each job saved with PPP funding cost taxpayers approximately $224,000, a huge sticker price and indicative of all the waste, fraud and abuse baked into this program.
In the face of so much suffering, it’s puzzling that leaders like Sen. Marco Rubio (R-Fla.) are spiking the football and bafflingly calling the program a “success,” when the New York Times found that “1 percent of the program’s 5.2 million borrowers — those seeking $1.4 million and above — received more than a quarter of the $523 billion disbursed.”
The fact is, President Trump and his allies have turned their backs on America’s entrepreneurs and workers. Small businesses haven’t had access to federal government support since August because Senate Majority Leader Mitch McConnell (R-Ky.) decided to jam through judges — including a lifetime Supreme Court justice — instead of helping America’s small businesses.
Americans need across-the-board relief now — an extension on the eviction moratorium, more unemployment insurance, and an additional direct cash payment. Small businesses need help. But we need to take a hard look at the weaknesses and shortcomings of this year’s small business lending program and make major changes to PPP. We need transparency and accountability measures written into the law and better access for communities of color as a start. And we need targeted relief for restaurants.
Mom-and-pop shops and their workers can’t wait another day — let alone another few weeks — for aid to arrive.
Caroline Ciccone is executive director of nonpartisan watchdog Accountable.US. She previously served as Deputy Assistant Administrator of the Office of Communications and Public Liaison at the U.S. Small Business Administration under President Obama.