I mean, in the vast majority of cases, if not all of them, the money did directly cover salaries. That wasn't how people grifted the money from PPP loans.
Payroll is often 50% or more of a business' expenditures. So, if a company does $1 million in business a month, ~500,000 of that is likely to go towards payroll. During the pandemic, the assumption was that your business was going to shut down, running on a skeleton crew, so you were only expected to make $250,000 per month, which means the government needs to 'loan' you $250,000 so that you can keep all of your employees on payroll and still pay them even if they aren't working.
But what if you just ... don't shut down? Or your business doesn't actually decrease? Now you've gotten $250,000 from the government for payroll, you use that $250,000 to pay payroll, but you still made your normal $1 million per month. That leaves you with an extra $250,000 profit that you normally wouldn't have that you can just do anything with.
That's how most of the PPP money was 'embezzled', 'stolen', or 'misappropriated'. Nearly all of the money from PPP loans did directly go to paying payroll. They were just paying the payroll for businesses that weren't actually impacted by COVID and thus those businesses just saw a massive amount of free profit which could go directly to the C-suite/business owners.
You are right that the PPP loans weren't a good idea. Instead, it should have been an unemployment type situation where individual people could get X% of their salary for Y months.
I ran a single one-person business and was just about to submit for a PPP loan I absolutely didn't need (to pay my own salary) when they implemented an emergency measure that the business had to be a certain size. I had dragged my feet because obviously this program didn't apply to businesses like mine until my payment processor reached out saying it did and here's how to apply.
Obviously I shouldn't have gotten one anyway, but the fact that it was ultimately yet another measure favoring larger businesses over small ones (on top of mandatory shutdowns etc) certainly didn't help anything.
Are you assuming good intent on the PPP program?? The Steven Mnuchin Inaugural Piggy Bank Fund?
In your last sentence you give away their game: an unemployment type situation?? You mean like the covid unemployment program running in actual parallel with PPP at the time? Or like how I as an employee had to tell my state and the feds what company terminated me in COVID to get my sweet COVIDbux?
It was not an accident that there were no guard rails or meaningful checks on PPP.
It was not an accident that there were no guard rails or meaningful checks on PPP.
Sure, but the PPP loans were also just a failed proposition from the start.
Their intent was to keep people employed so that, after lockdowns/COVID was over, there wouldn't be a period of a huge amount of people all looking for jobs at once and the economy would be able to 'bounce back' faster. Instead, people would just go right on back to working the jobs that they previously held.
It's not a bad idea, but it was just never going to work in practicality. The PPP loans weren't terrible solely because they were, intentionally, poorly implemented, but more so because they attempted to fix a problem with a solution that would never have worked even if you did properly regulate the PPP loans.
In your last sentence you give away their game: an unemployment type situation?? You mean like the covid unemployment program running in actual parallel with PPP at the time?
Unless there is one that I am missing, there were not any real unemployment schemes done alongside the PPP loans.
There was the FPUC which supplemented state unemployment benefits for some people. And there was the PUA which granted benefits to those that normally wouldn't qualify for unemployment such as gig workers and self-employed persons.
The PUA would be part of what I was talking about, but neither of these programs were what I was saying.
The PPP loans existed to keep people employed so that they specifically would not get unemployment. I don't think that this is something that we should have attempted to address. I think it would have been a better move to recognize that mass unemployment was going to happen and to focus on saving the people and maintaining their purchasing power rather than to attempt to salvage businesses. I know it isn't a sentiment that people like to hear, but, any business worth saving through the PPP loans didn't need the loans to survive. But all business could have continued to use a customer base that still have the same level of income.
When you reduce the spendable income of the majority of the population while also try to throw money at closed business to keep them afloat -- you aren't solving anything. You are just pushing out the time line for when those businesses are going to fail. It's basically the Kitchen Nightmares effect.
While, proportionally, I would expect more business to have 'failed' or closed; all of those businesses would have been replaced by equal, new businesses after COVID. As was seen through the stimlus that people got, if you maintain the flow of money to consumers, they will still continue to spend their money. Maybe they can't go out to restaurants, but people bought more hobby items, move games, more movies -- other businesses saw spikes when most things went down.
It would have been better to provide additional funding to state unemployment services so that they could fund more people on unemployment at a higher percentage of their original salary rather than to waste any money attempting to prop up struggling businesses.
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u/PM_YOUR_ISSUES 3h ago
I mean, in the vast majority of cases, if not all of them, the money did directly cover salaries. That wasn't how people grifted the money from PPP loans.
Payroll is often 50% or more of a business' expenditures. So, if a company does $1 million in business a month, ~500,000 of that is likely to go towards payroll. During the pandemic, the assumption was that your business was going to shut down, running on a skeleton crew, so you were only expected to make $250,000 per month, which means the government needs to 'loan' you $250,000 so that you can keep all of your employees on payroll and still pay them even if they aren't working.
But what if you just ... don't shut down? Or your business doesn't actually decrease? Now you've gotten $250,000 from the government for payroll, you use that $250,000 to pay payroll, but you still made your normal $1 million per month. That leaves you with an extra $250,000 profit that you normally wouldn't have that you can just do anything with.
That's how most of the PPP money was 'embezzled', 'stolen', or 'misappropriated'. Nearly all of the money from PPP loans did directly go to paying payroll. They were just paying the payroll for businesses that weren't actually impacted by COVID and thus those businesses just saw a massive amount of free profit which could go directly to the C-suite/business owners.
You are right that the PPP loans weren't a good idea. Instead, it should have been an unemployment type situation where individual people could get X% of their salary for Y months.