There’s been heavy coverage of the problems we’ve had rolling out the coronavirus rescue programs. Unemployment offices are swamped. Conditions are too onerous for the small business loan program. The $1,200 checks won’t go out until late summer for some people.
This was pretty much inevitable. Standing up programs like this in a matter of weeks was never going to be easy. But the very fact that they’re running into problems is evidence of just how popular they are. Take the small business loan program, for example. It has already approved $50 billion in loans in just three days and looks like it will be oversubscribed within weeks:
Treasury Secretary Steven Mnuchin on Tuesday asked congressional leaders to swiftly commit another $250 billion to replenish a new small business coronavirus program that is being overwhelmed by surging demand….Democrats haven’t rejected the proposal but they have said they want to prioritize other assistance, such as hazard pay for workers.
There are two things going on here. First, the demand for small business loans—despite the well-known issues with bank restrictions—is sky high. Since our goal is to keep as many as possible of these businesses solvent, adding more money to the fund makes sense.
However, there’s also a problem: in order for the loans to be forgiven, they have to be used mostly for payroll. But a lot of small-business workers have already been laid off and have applied for unemployment benefits. Thanks to the rescue bill, these benefits are, in most case, considerably more than they were paid for working. So why would they go back?
One answer could come from Chuck Schumer’s proposal to offer “hazard pay” to essential front-line workers so they don’t feel cheated by making less than they would if they were laid off. Perhaps this could be extended to workers who are rehired by shuttered businesses? If so, it would eliminate the motivation to stay on unemployment. More details to come, I’m sure.
