While the CARES Act is a patchwork, the rocky start to the Paycheck Protection Program is actually showing us one of the benefits of a patchwork approach. jbarro writes
Photo: Getty Images Less than two weeks after the program launched, the Paycheck Protection Program ran out of money. This was foreseeable: Eligibility for the program — which makes low-interest loans to businesses with fewer than 500 employees and forgives the loans if the employees are kept on payroll, effectively subsidizing their labor costs — is very broad.
In fairness, the government had to put this thing together in just a few weeks. It did not have a good solution it could take off the shelf to provide payroll support to firms, so it came up with this structure that relies on the Small Business Administration to issue forgivable loans to businesses through private banks.
The cap on the program encouraged everyone to apply at once, clogging the banks. While businesses theoretically had until June 30 to apply for the loans, they sensibly rushed to apply quickly before the money ran out. Of course, many firms also applied quickly because they are battered by the crisis and have acute cash needs, but some might have waited if the clock had not been ticking so loudly.
While the CARES Act is a patchwork, the rocky start to the PPP program is actually showing us one of the benefits of a patchwork approach. The law’s PPP and enhanced unemployment benefits provisions together provide two ways to get cash from the government to a worker at a distressed business: financial support to help the business keep paying the worker, or benefits after the worker is lay off.
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