Memorandum: Our Tax Dollars Went to Big Corporations at the Expense of Small Businesses and Workers
TO: Interested Parties
Pros And Cons Of Tail Risk Funds
Editor’s note: This article is part of a series ValueWalk is doing on tail risk hedge funds. The series is based on over a month of research and discussions with over a dozen experts in the field. All the content will be first available to our premium subscribers and some will be released at a Read More
FROM: Kyle Herrig, President of Accountable.US
DATE: June 21, 2020
RE: What We Know About the Trump Administration’s Coronavirus Response: Our Tax Dollars Went to Big Corporations at the Expense of Small Businesses and Workers
When President Trump signed the CARES Act into law nearly three months ago, he promised that the legislation would “keep our small businesses strong and our big businesses strong. And that’s keeping our country strong and our jobs strong.”
While Trump’s policies have helped big businesses and the stock market is doing well, small businesses and workers continue to struggle, with little hope in sight. Already more than 100,000 small businesses have gone under, the unemployment rate for people of color has tripled, and an estimated 40% of small businesses owned by Black Americans may not survive the pandemic.
Here’s a recap from the last few days of how the Trump administration has helped big businesses more than anyone else — just in the past few days.
Oversight Commission: Government Had "Powerful Impact" for Large Companies, but "Less Evidence" Government Actions "Have Been Beneficial" for Small Businesses And Workers
On June 18, the Congressional Oversight Commission released its second report on the oversight of Treasury Department and Federal Reserve programs under the CARES Act. Its conclusion is similar to the one Accountable.Us has been noting for months: big businesses are getting the breaks; small businesses are struggling. The Commission writes:
In some areas of the economy, such as the ability of larger companies to issue debt to continue operations, the agencies’ actions have had a clear and powerful impact.7 But there is less evidence that the actions of the Treasury and the Federal Reserve have been as beneficial for small and mid-sized businesses and state and local governments.
Wall Street Journal: Federal Aid “Didn’t Work for Many that Needed It”
Part of the CARES Act included the $600 billion Paycheck Protection Program (PPP) intended to help small businesses keep their workers on payroll. This past week, the Wall Street Journal reported that “PPP Small-Business Loans Left Behind Many of America’s Neediest Firms.” The entire article is worth a read, but here are some key excerpts:
- “Yet the PPP left many of the hardest-hit empty-handed. Looking back, the program failed to take into account the near-countless varieties of small business, which employ nearly half of U.S. private-sector workers, and how best to help them, according to economists, business owners and bankers.”
- “‘[The Trump administration] made a number of weak choices in designing the program as a loan program, when they wanted it to be a grant program,’ said Josh Gotbaum, a former senior official at Treasury and the Office of Management and Budget who has worked for five administrations of both parties.”
- “The shortcomings have yielded a patchwork of fixes. The SBA and Treasury issued 19 ‘interim final rules’ to clarify and improve the PPP.”
- “The program was designed to work through banks and other lenders...Many small-business owners have few ties to banks beyond checking accounts.”
- “It didn’t seem the SBA understood the complexity of launching a national loan program in so short a time, these people said.”
Large Corporations Getting $155 Billion in Tax Windfalls While Workers Got... $1,200
In addition to federal aid through programs like the PPP, the CARES Act included new tax carveouts that disproportionately benefit large corporations. As a result, according to Axios, “Corporations are getting billions in multiyear cash benefits, while most Americans received one-time, $1,200 checks to offset the economic turmoil and mass unemployment arising from the pandemic.”
The Joint Committee on Taxation estimated that big corporations would see a $155 billion tax windfall this year and 2021 from just three tax cuts in the CARES Act. Meanwhile, most workers only received a one-time, $1,200 stimulus check and enhanced unemployment benefits that they refuse to extend even though Americans will soon start running out.
Will the Administration Finally Help Small Businesses and Workers? Hard to Tell if It Keeps the Details Secret
The Trump administration has gone to great lengths to keep basic information about taxpayer support to businesses secret, making it virtually impossible for the public and Congress to assess the effectiveness of the programs and stamp out malfeasance.
In recent months, PPP has dispersed hundreds of billions of dollars with little or no public disclosures thus far. This week, the Federal Reserve started the Main Street Lending Program, intended to provide billions in relief to mid-sized businesses. Will these programs help the people or businesses they are supposed to? Right now, that is a hard question to answer.
Just this week, inspectors general on the Pandemic Response Accountability Committee released a report warning the lack of transparency and lax reporting requirements is limiting the ability to ensure federal aid is getting to the people who need it.
While in a Friday night news-dump Treasury Secretary Steven Mnuchin announced that the administration would disclose a limited amount of information on PPP loans, such as a range of the loan amount and business names, this information still keeps “most of the borrowers who took advantage of the taxpayer-funded forgivable loans...unknown.” Based on how they structured these public disclosures, up to 86% of loan recipients may still be hidden from the public. Nor does it provide information on what amount of the loan was forgiven versus what has to be repaid.
As we have seen time and time again, transparency and disclosure are key components of making sure the people who are supposed to be getting aid are actually getting it and taxpayer dollars are being spent wisely. Accountable.US will continue to do its part to push for more transparency, disclosure and oversight.