Taxpayers may never know how many jobs the $ 1 trillion P3 program has saved. The government did not count | Government

WASHINGTON – A year after Congress created the Paycheck Protection Program, taxpayers don’t know how many jobs have been saved thanks to the nearly $ 1 trillion in forgivable loans given to businesses during the pandemic .

And economists and government watch groups say they probably never will – because government didn’t count.

The PPP has been touted as a way to save millions of jobs threatened during the COVID-19 recession. But the Small Business Administration under Trump – and now under Biden – has not kept track of the numbers on the jobs that have been saved, despite a legal obligation to do so.

“No one will really know, except the beneficiaries, what happened with the loan and the jobs,” said Sean Moulton, senior policy analyst at the government watch group Project on Government Oversight.

The SBA’s initial estimate of 50 million jobs “supported” by the PPP was quickly dismissed as grossly inaccurate. Economists at the Treasury Department put the number closer to 19 million, while economists study the program estimate between 2 and 5 million.

Over 8.7 million forgivable loans worth $ 961 billion have been made to date. And President Joe Biden just signed a two-month extension, allowing the SBA to accept requests for $ 79 billion in loans until May 31. SBA officials told Congress they expected the money to run out by the end of April. (The Los Angeles Times reported last week that it had received a $ 10 million PPP loan.)

But now, a program that was originally promoted as a way to save millions of American jobs appears to have done a lot more to help businesses and their owners, according to early economic studies.

Thousands of businesses, including some that received PPP loans of $ 10 million, said they had saved no jobs with the aid, according to the SBA. In other cases, PPP recipients have used the two or three months of salary support to simply postpone layoffs. And smaller businesses – those that need help paying their employees the most – have often missed the program altogether.

Almost 19 million Americans currently collect unemployment insurance benefits. Since nearly half of American workers are employed by a small business, knowing whether the program was successful could be critical to understanding how long the country’s economic recovery will take.

When it launched in 2020, the PPP exhausted $ 349 billion in just 13 days. It was quickly recognized as one of the most successful pandemic relief programs – until questions arose as to whether all of the beneficiaries really needed the money and some names prominent hamburger chain Shake Shack and the Los Angeles Lakers have paid off their loans.

By law, Congress instructed the SBA to collect and release quarterly data from all companies that received more than $ 150,000, including the number of jobs affected by the loan and estimated economic growth. of the company.

In April 2020, just days after the program began issuing loans, the Trump administration’s Office of Management and Budget asked the agency not to ask loan recipients to report the number estimate of jobs created or retained.

OMB said “centrally available economic data” would provide sufficient information to produce the report. His memo didn’t specify where that data would come from, how it would be verified, or why he didn’t want companies to provide the information.

The result was a mishmash of data. Some companies voluntarily listed the employees who would be supported by the money, others refused. Dozens said the data released by the SBA did not accurately reflect their employee count or what they had listed on their apps.

In January, the agency’s inspector general pointed out in a report that reliable information on the number of jobs saved was not available because the SBA had not collected it.

“ASB officials and national leaders do not have enough information to make informed decisions or to determine how well the PPP has met the objectives of the national program. Also, SBA cannot accurately report the jobs retained by PPP borrowers, ”the watchdog said.

On Thursday, an OMB spokesperson did not say whether the Biden administration intended to reverse Trump’s policies and start collecting the data as Congress ordered.

SBA officials have repeatedly told Congress last year that clearer figures regarding jobs will be available once companies request cancellation of their loans, an ongoing process. This application asks for the number of jobs supported by the loan. But that is unlikely to provide the answer.

Moulton said the pardon requests will only provide a snapshot of current conditions, not the five years of job data that Congress specifically asked for in the CARES Act to verify whether the loans have kept people in their jobs. long-term. Employees who were paid using the loan could have been made redundant as soon as the money ran out, he said.

The PPP’s focus on jobs changed over the year, with companies worrying that there was no point in paying employees if they were unable to pay rent and to stay afloat. This led to changes that allowed more money to be spent on non-salary expenses.

Initially, borrowers had to devote at least 75% of their loans to the payroll in order to be fully forgiven. But in June, Congress lowered that threshold to 60%, giving businesses more money to spend on expenses like rent and more time to spend it.

No one disputes that the program has probably helped thousands of small businesses to survive. The scope of the number of closings and the number of people left open will become more evident as tax returns and bankruptcy data become available on time, economists say.

Senator Jeanne Shaheen, DN.H., said the change made by Congress was an attempt to give small businesses more flexibility to keep their doors open, which in turn would preserve jobs.

“If they close, these people have nowhere to go to work,” Shaheen said. “Keeping small businesses open is about jobs.”

The program was designed to help as many businesses as possible, with little evidence needed from them to know if they have actually suffered a loss of income as a result of the pandemic.

Especially at the start of the program, much of the money went to companies that had not lost revenue, had other resources like lines of credit to tap into, or were unlikely to fire workers without it. ready.

Microenterprises, those with fewer than 10 employees, which would have benefited the most from this money, were sidelined in the first round by large companies that had lending relationships with large banks.

Eric Zwick, an economist at the University of Chicago School of Business who studied the program, said Congress could have changed the program in the early months of the pandemic after seeing how much money was going to companies that were not in regions or industries facing economic peril due to the closures. Congress waited until December to prioritize loans to businesses with fewer employees and with significant drops in revenue.

“You could have had the same program, just as (beneficial), maybe for half the price,” Zwick said.

Robert Bartlett, professor of law at Berkeley, who surveyed Oakland businesses during the pandemic, found that the loan’s contribution to a company’s survival expectancy largely depended on the number of people it employed .

Microenterprises with fewer than five employees needed their employees to keep working in order to stay open and thus benefited the most from payroll support, Bartlett said. They were 20% more likely to say they expected to be open in six months because of the loan.

But for companies with more than five employees, layoffs were the best way to manage cash flow, and they needed government rent assistance more than payroll assistance, Bartlett said. Although the PPP delayed layoffs for a few months, they reported that the loans did not have a lasting effect on the companies’ ability to survive the next six months.

“One-size-fits-all programs can be politically expedient, but they might not be what all small businesses… need,” Bartlett said.

The program expired in August, but Congress approved a second round of loans in December, tightening eligibility requirements to focus support on the smallest, hardest-hit businesses and those with the most declining incomes. . Only businesses with fewer than 300 employees could apply for a second loan and funds were earmarked for small minority businesses in particular. It also created direct grants for performance venues and restaurants, which the SBA plans to make available in April.

Companies applying for PPP loans still do not have to report the number of jobs saved. Moulton, of the watchdog group, is urging the Biden administration to start collecting this data and retroactively asking former recipients to release their numbers, in order to measure the success of the program.

“We’re spending money right now on this program,” Moulton said. “It’s never too late to start getting this information.”

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