The House yesterday approved the Payroll Protection Program and Health Care Enhancement Act. The PPP part of the law quite literally just increases the amount of money allocated to the program. That’s it. The law does almost nothing to fix the serious defects of the program in the original CARES act. This is remarkable because the initial law was so poorly drafted: The sign-up process was first come, first served, which favored larger businesses with better access to credit and stronger banking relationships – firms least likely to need assistance to survive. The sign-up process appears to have disfavored areas that and industries that are hardest hit by the economic downturn. The act requires businesses to rehire staff to get loan forgiveness, but
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The House yesterday approved the Payroll Protection Program and Health Care Enhancement Act. The PPP part of the law quite literally just increases the amount of money allocated to the program. That’s it. The law does almost nothing to fix the serious defects of the program in the original CARES act. This is remarkable because the initial law was so poorly drafted:
- The sign-up process was first come, first served, which favored larger businesses with better access to credit and stronger banking relationships – firms least likely to need assistance to survive.
- The sign-up process appears to have disfavored areas that and industries that are hardest hit by the economic downturn.
- The act requires businesses to rehire staff to get loan forgiveness, but many laid-off employees are earning more on the new generous unemployment program than they did at work. This makes it difficult for some businesses to re-open and qualify for loan forgiveness.
- Loan forgiveness is limited for businesses with higher non-payroll costs.
- The money is very poorly targeted. A business can qualify for PPP money even if it is still profitable. To get money, a business owner just has to certify that “current economic uncertainty makes the loan necessary to support your ongoing operations”. Basically, if you can reasonably claim to be worried about the effect of economic conditions on your business, step right up!
There is a good chance that we will discover that much of the money given away under this act was given to businesses that did not need it. Since the current cost of almost $700 billion is only supposed to cover two months, and will probably be insufficient to do that, and there is no end in sight to the current economic freeze, this is inexcusable. It would have been easy for the Senate to fix some of these problems.
The bill also provides $75 billion for health care providers and $25 billion for testing. The testing provisions were controversial, with Republicans trying to put responsibility on states and Democrats wanting a more aggressive federal response led by President Trump. There are a few restrictions on how the testing money will be spent (mostly related to how the money is allocated between the feds, states and localities, tribes). States are required to develop testing plans and the feds are required to distribute some of the funds within 30 days. The Trump administration is supposed to develop a strategic testing plan that will “address how the Secretary will increase domestic testing capacity”, and the plan is supposed to be updated every 90 days. I’m sure that will be helpful. (In fact, I don’t see anything in the bill that would prevent Trump from giving all the money to the states and washing his hands of responsibility entirely, but I may be missing something.)
My overall take is that the provisions related to testing are not nearly aggressive enough, and they are extremely vague. Vague delegations won’t work in our current era of divided and highly polarized government, and it certainly won’t work with Trump running the executive branch. Democrats need a new legislative playbook that avoids just tossing problems over to the executive branch to solve. This is hard but can be done. (See here and here for previous discussions.)
Despite my criticisms of the bill, it is arguably better than nothing, and I might well have supported the bill if I were a rank and file House member. (In fact, the only House Democrat to vote against the bill was Ocasio-Cortez.) The big question is what Democrats could have done to achieve a better outcome. It is hard to tell from outside, but figuring out how to do better is critical.