A new report from the Federal Reserve Bank of St. Louis is startling, to say the least.
According to NBC, what that report found was that 75% of the $800 billion Paycheck Protection Program never reached employees.
Here’s another way to put it, via NBC:
Taxpayers paid $4 for every $1 in wages and benefits received by workers in jobs saved by the federal government’s pandemic Paycheck Protection Program (PPP), according to a new study by the Federal Reserve Bank of St. Louis.
That’s right: for every $4 that you gave the government to protect employee paychecks, the employees only saw $1 of it. The big question, of course, is “where did the other $3 go?” Read on.
The Paycheck Protection Program was one of those products of the coronavirus pandemic. It came as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
The Paycheck Protection Program was a response to those executive orders that either shut small businesses down or severely limited their operations. The program was designed to help these businesses survive by granting them forgivable loans of up to $10 million. For forgiveness, the employer only had to keep employment and wages at pre-pandemic levels for two to six months after the acceptance of the loan funds.
Recently, it has been reported that 90% of the Paycheck Protection Program loans have been forgiven.
It has also been reported that these loans saved 2.97 million jobs per week during the second quarter of 2020 and 1.75 million per week during the fourth quarter of 2020.
So, was it a success?
This was the question that the Federal Reserve Bank of St. Louis sought to answer with its study.
Here is what they found:
The PPP was a very large and very timely fiscal-policy intervention, saving about 3 million jobs at its peak in the second quarter of 2020 and distributing $800 billion well within two years of the onset of the COVID-19 crisis. But it was poorly targeted, as almost three-quarters of its benefits went to unintended recipients, including business owners, creditors and suppliers, rather than to workers.
The study also found that “due to differences in the typical incomes of those varied constituencies, [the program] also ended up being quite regressive compared with other major COVID-19 relief programs, as it benefited high-income households much more.”
So, the answer would seem to be that the Paycheck Protection Program was not successful. What else would you expect from such a government program? When was the last time that one was effective?