In the midst of chaos and crises there is a natural tendency to rush to do something, anything that indicates action. Counterintuitively the better action is to do nothing until the damage is assessed and an inventory is compiled of the resources needed for corrective purposes.
Unfortunately, this thinking runs counter to politicians who feel they’ve been elected to solve problems as in the case of the COVID-19 pandemic. National, state and local governments and their respective agencies have been working feverishly, pardon the pun, to address the health concerns of the pandemic, only to make decisions that have created new problems requiring corrective action, which in turn could compound the impacts of the original threat.
The closure of business operations across the country, dictated by local, state and federal governments, is devastating the nation’s economy. Thousands of businesses are closed, some permanently, which in turn has left hundreds of thousands unemployed. Now the country is faced with an economic calamity that will equal if not surpass the health impacts of COVID-19.
To soften the economic damage created by the national quarantine directives, the federal government initiated the Paycheck Protection Plan (PPP), designed to provide low interest loans and grants to small businesses to allow for re-employment of displaced workers. The program was supported with $350 billion designated for small businesses (500 or fewer employees) to be used to rehire those employees laid off due to lost business as a result of the various “shelter-in-place” regulations.
The federal government’s paycheck program, passed in a pitch of political activism and little strategic forethought, is flawed on three counts. First, many of the small businesses were, and still are, closed due to state mandates. And because the businesses are closed there is no justification for hiring workers until the doors can re-open. The question remains, will these small businesses in fact re-open?
The second failure was inadequate funding. The funds to be doled out to small businesses lasted just under two weeks, not the two months as anticipated. The list of outstanding requests is so long that Congress is in the process of creating additional funding with another $250 billion in PPP version 2.
Thirdly, the rules for acquiring the funds were so loosely designed that major corporations were able to benefit from the program. Attempting to restrict the recipients to small businesses, under 500 employees, the designers of the program failed to disallow large corporations with smaller operational units such as major restaurant chains that identified each operating unit independently.
The situation was so embarrassing that one recipient of the PPP funds, Shake Shack, a 1.6 billion New York-based burger and fry chain, is returning its $10 million grant. Other well-known and highly successful restaurants such as Ruth’s Chris Steak House (stock value of $20 million) and the Potbelly Sandwich Shop franchise ($89 million valuation) are among numerous hotel and food chains benefiting from federal largesse.
At least Shake Shack has the integrity, albeit in hindsight, to realize it was gaming the system at the cost of hurting the very small operators that were the intended target.
This one effort to aid the economy is just one of many the good intentioned, yet poorly planned and executed, actions that are typical of government thinking.
Last week Morehead City commissioners, again with the best of intentions, created a special loan program to assist small businesses impacted by the COVID-19 pandemic and the subsequent closure of many retail businesses at the direction of the governor. We opined then and reiterate that the city’s loan program is poorly defined, discriminatory and questionably funded since it is using public dollars to assist a select few.
Just as the federal PPP is creating embarrassment for the administration, likewise the Morehead city program is creating a similar challenge for the town board.
The answer to solving our economic woes can best be had if government, at the local, state and national levels, stops erecting barriers and controls. Government should focus its role as being a facilitator not an arbiter.