Hooray! The Paycheck Protection Program Starts Friday.

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I’ve been whining for a while about the stimulus checks in the coronavirus bill getting outsized attention even though the expanded unemployment benefits are far bigger and more important. So it’s only fair that I hand the microphone over to a fellow whiner who wants everyone to know that the coronavirus rescue bill also authorizes a huge money hose aimed at small businesses as long as the money is . . .

. . . used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll)

The program starts on April 3. Here is William Winecoff of the University of Indiana:

I can’t believe everyone is missing the news of the day: The US just went full-Denmark on payroll support. Except better (assuming quick expansion to large corporations). I haven’t smiled in weeks. I’m beaming. If we keep recapitalizing this as needed we could actually avoid a Depression.

It’s a loan program. But loans are fully forgiven if 75% or more of them go towards payrolls. Including benefits. And (rapid) rehires. So it should function like a grant program. The reason why it is structured as a loan program is because it can be administered through FDIC banks, credit unions, etc.

If this works well, you can walk into your local bank and get cash fast. Maybe on the spot? But the banks can’t profit; no fees allowed. Also no collateral, no personal guarantees required….Payroll support is for 8 weeks, which buys us a good amount of time. Also creates infrastructure if it needs to be expanded further.

So, as I read it, and if it works, it’s full payroll support, for free, without having to go through the SBA directly, and also support for business rent/mortgage/utilities payments. That’s huge! And because it’s a Treasury program it can be easily backstopped by the Fed, which allows for quick expansion if needed (it will be needed). Unless I’m missing something this is a very big deal. It needs to be expanded to ALL workers, not just small businesses, and it will need more funding support (and/or something creative like a Fannie/Freddie for SMEs). But I never thought this admin would do something this decent.

They’ve released the application form. Very simple.

Yep. This is all correct. So here’s a summary of the assistance that the coronavirus rescue bill provides for ordinary people:

  1. A $1,200 check for just about everyone with a middle-class income or less. That’s almost $3,000 for a family of three.
  2. A program that encourages small businesses to keep workers employed by funding their payroll costs.
  3. For those workers who are laid off anyway, an expanded unemployment insurance program that replaces 100 percent or more of your normal income up to $50-60,000 (depending on what state you live in).

This adds up to about a trillion dollars, and virtually all of it is for non-rich people. Is everyone starting to get an idea of why I’ve been so enthusiastic about the way this bill ended up? It’s pretty damn good.

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