Three-quarters of PPP Benefits Went to Unintended Recipients | Eastern North Carolina Now

    Publisher's Note: This post appears here courtesy of the John Locke Foundation. The author of this post is Paige Terryberry.

    In response to the Covid shutdown recession, the Small Business Administration and Department of the Treasury rolled out the Paycheck Protection Program (PPP). PPP distributed $800 billion within two years with the stated intent to maintain payroll, retain employees laid off due to Covid, and cover overhead.

    A new study in the Journal of Economic Perspectives evaluated the efficiency of PPP and revealed astounding government inefficiencies. Though the program was temporary and timely, it was "essentially untargeted."

    Only about a quarter of PPP funds supported jobs that otherwise would have disappeared, according to the report.

    The program was implemented quickly, prioritizing immediate relief. The study notes, "Ironically, the program feature that arguably made the Paycheck Protection Program's meteoric scale-up possible is also the feature that made it potentially the most problematic: the program was essentially untargeted, aside from excluding firms with more than 500 workers." In the end, 94 percent of all small businesses took up a PPP loan. The tradeoff between speed and targeting was significant, resulting in waste.

    The program did not prioritize the highest need. Instead, "loans reached the most and least distressed firms-and all those in between-in nearly equal proportions."

    Only roughly 25 percent of the PPP's efforts went to workers' wages. The majority of the funds, however, went to the small business's creditors and suppliers.

    The cost to taxpayers for preserving jobs was a substantial $169,000 to $258,000 per job for a year depending on the firm's size.

    The study also analyzed who ultimately received these loans and found the results to be highly regressive, with 72 percent of PPP funds going to households with incomes in the top 20 percent.

    Confusion surrounded the program. Initially, demand for loans exceeded the banks' abilities to execute them. Businesses also lacked clarity on whether the loans would be forgiven.


    Unlike some countries, the U.S. lacked the existing administrative infrastructure for overseeing targeted federal aid to businesses. The study found that such an infrastructure is crucial to preventing waste: "building administrative capacity now would enable greatly improved targeting of either employment or business liquidity when the next pandemic or other large-scale economic emergency occurs, as it surely will." Accepting the inevitability of both another Covid-style shutdown or economic emergency, along with a massive federal bailout, is quite concerning.

    The study also recommended "work-sharing" to assist in targeting. Work sharing would encourage a reduction in hours across the broader workforce, for example, to prevent mass unemployment in any given group. It would encourage "paying partial unemployment to many, rather than full unemployment to some" which would result in a more stable economy, according to the study's authors.

Inarguably, the policies of the Democrats in congress and Joe Biden as the Executive is plunging the United States into a recession, if we are not already there; a recession that was completely avoidable. Will abrupt changes in policies occur in time?
  Yes, the Democrats have a bold plan, yet to be revealed, to save us.
  No, there will have to be a complete undoing of the damage done by these Democrats.
  I can't do simple math, so how am I to understand the concept of basic economics.
1,215 total vote(s)     What's your Opinion?

    In the end, the program's timeliness, a reflection of the great need and uncertainty, was a success. But the accolades end there. With essentially no targeting at all, allowing universal takeup, taxpayers were left on the hook for the government's unintended consequences and lack of alternatives.
Go Back


Latest Regional Business

North Carolina is one of six southern states that, together, have become an economic powerhouse, overtaking the once dominant Northeast region of the United States. That’s according to a new analysis from Bloomberg.
North Carolina is set to receive over $1.53 billion in federal funding to help with expanding high-speed internet across the state. The U.S. Department of Commerce’s National Telecommunications and Information Administration (NTIA) made the announcement Monday.
It’s not just young people who are getting screwed by the current economy.
The Federal Reserve hiked interest rates to the highest level in 22 years on Wednesday, despite easing inflationary pressures.
David Stevens, a senior housing official under former President Barack Obama, condemned a proposal from President Joe Biden that will effectively penalize financially stable homebuyers to subsidize those with higher risk.


North Carolina benefitted from the COVID-19 pandemic in terms of small business migration. That’s according to a new Bureau of Labor Statistics report.
Last week, Beer Serves America reported that the beer industry contributes 75,082 jobs and brings in about $1.8 billion in taxes to the state of North Carolina.
As Americans fled the Northeast United States with its repressive social policies during the coronavirus pandemic and immigrated to states in the South, the region lost its traditional position as the leader in contributing to the national GDP — to the South.
Only minutes from Greenville and Washington, we offer this unique high lot above the wide waters within the Pamlico Estuary, where one can build their dream home with such massive views of both the Chocowinity Bay and the Pamlico River.
Endorsement of the LGBTQ movement by hiring diverse suppliers is a prominent theme in the most recent ESG report from Target, a reality which emerges as the brand faces backlash for controversial moves surrounding a recent “Pride Month” apparel collection.


Target CEO Brian Cornell said in an interview days before his company experienced massive backlash for “Pride Month” efforts that “woke capitalism” was beneficial to his firm.


Back to Top