Facing dueling economic and public health crises in recent months, Congress has approved trillions of dollars in stimulus funding, with more likely to come soon. Moving swiftly and aggressively to help those in need – like the 2.5 million Texans, and nearly 150,000 residents of Bexar County, who have filed for unemployment during the pandemic – is laudable.
But, instead of implementing pro-growth programs that support Texas small businesses and entrepreneurs, who create nearly all the country’s net new jobs in a given year, lobbyists in Washington jumped into the fray.
What came next was predictable: investment firms managing billions got Paycheck Protection Program (PPP) funds, as did more than 45 major law firms, along with elite, Washington private schools that have educated the children of presidents. More than 300 public companies received $1 billion of stimulus. Airlines, cruise companies, hotel chains, and defense contractors with years-long government contracts received federal relief. A public, Dallas-based asset management firm received more than $53 million (which they’ve since sent back to the government).
Then there’s the Walt Disney Company’s latest moves, which exemplify how the government’s economic response to COVID-19 has missed the mark when it comes to supporting small business. In order to save $500 million per month, Disney furloughed 100,000 workers – with taxpayers largely picking up the tab via unemployment benefits. For now, the company is keeping in place its executive bonus schemes. We all love Mickey Mouse, but when the public is effectively subsidizing a $200 billion corporation, it means less support for those who need it.
This isn’t about policymaking in haste. It’s about lobbying.
Coca-Cola, Hewlett Packard Enterprise, among other multi-national companies, successfully lobbied for $174 billion in tax breaks for large corporations to be tucked into the CARES Act. This included rolling back restrictions on how much debt companies can deduct from their taxes, as well as a new, creative way for households earning more than $500,000 to reduce their capital gains. Some of the world’s largest investment firms spent millions lobbying to ensure that the original, small business program would “not discriminate on deciding who qualified for a relief loan, particularly if they’re backed by private equity firms.”
Only 20 percent of applicants nationwide received relief from the original pool of funding, and many are finding it harder to reopen when half of all U.S. workers stand to earn more from their unemployment benefits than they do from their paychecks. While San Antonio has a high acceptance rate for PPP loans, small business owners are learning the hard way that converting their loans into grants isn’t a guarantee due to complex regulations and rules.
To be fair, responding to the COVID-19 pandemic was never going to be easy. Quickly designing, passing, and successfully implementing the largest recovery package in American history was a monumental task. Even the most competent and well-intentioned policymakers would have faced challenges. And that was before protests and unrest further complicate an already precarious situation.
But if we want to save millions of jobs, protect livelihoods, and plant the seeds for a robust economic recovery, Congress and the White House need to do much more to support small businesses.
That means, through at least 2022, the Small Business Administration should double the 50,000 loans per year that it was averaging before the pandemic. It also means that the SBA’s 7(a) loan application should be made simpler and less time-intensive for banks and small business owners. And with more guidance and oversight, we can help ensure those who need the money get the money. It also means that as we carefully reopen and protect public health, we don’t add overly burdensome regulations on small businesses barely getting by.
Then there’s fairness.
Small business owners often pay the highest income tax rate, since their companies are typically structured with pass-through income to the individual owner. If we’re allowing private equity and hedge fund managers to pay a lower tax rate, we ought to do the same for entrepreneurs. And for those launching startups with high-growth potential, Congress should consider new ways to increase access to capital so founders can more easily start and scale their ventures.
We have a long road ahead as we navigate the economic and public health challenges of a pandemic. It won’t be easy. Policymakers have a critically important role to play. They can, and should, do more to support small businesses and, by extension, Texas’ and America’s economic engine.