Congress’s paycheck protection program doing more to hurt than help

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The government’s pandemic-prompted, $660 billion Paycheck Protection Program pays businesses to not lay their workers off. Unfortunately, the program’s specific requirement that 75 percent of PPP loans go to hiring workers is doing more to hurt than help economic recovery and preserve jobs.

As with so many bad ideas, good intentions were involved. Congress wanted to ensure that workers remained employed, hence the provision that the loans would be forgiven only if the 75 percent threshold was met. That created a damned-if-you-do-and-damned-if-you-don’t scenario for business owners. If they spent three-quarters of the money on paychecks, they may not have enough left over to pay rent, vendors, utilities, or any other expenses that have been piling up since the outbreak started. But if business owners paid the rent and those other urgent expenses first, they put themselves on the hook for a big IOU to Uncle Sam, which will just make crawling out of the financial hole they are in that much harder.

Manhattan hair salon owners Andrea Hans and Jose Sanchez belatedly discovered that only $43,500 of the $174,000 loan they received could go towards paying the estimated $60,000 in bills they faced. “We put our life savings, every moment of our time and any financial resources we had toward opening this business,” Hans told the Wall Street Journal. “It feels like a funny joke if we had to close because of this.”

Read the full article on The Hill.