Tuesday, December 01, 2020

Better Way


 Interesting points argued by two journalists:

Broad PPP is way less important and useful than targeted help to the most impacted (and hazardous) small businesses.
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Jordan Weissmann
These seem like the contours of a workable deal, but reupping PPP at $300B instead of including the RESTAURANT Act would be a serious public health and economic mistake. twitter.com/jstein_wapo/st…
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Interesting, but probably wrong. For my money, I'd side with New York University marketing professor Scott Galloway, most recently author of "Post Corona: From Crisis to Opportunity." A couple of weeks ago, he told (video below) MSNBC's Stephanie Ruhle

What I'm fearful of, to your previous guest's comments, he added some very powerful points. Eleven million people work in the restaurant industry. The question is, would we as a society have been better off if we just put the money directly in the hands of the eleven million as opposed to the restaurateurs. I don't think the restaurant industry is going to come back in any shape or form similar to what it's been....

I wonder if we would have been better off creating more demand and deciding-letting consumers decide which restaurants survive and adapt and which ones go out of business. I think we're going to find in retrospect, Stephanie, that a lot of this PPP loans weren't bridges They were piers and all we've done i is kick the can down the road. 

At that moment, Ruhle noted "the Wall Street Journal says about 300 companies that received as much as half a billion dollars in PPP loans have already filed for bankruptcy" and Galloway continued

About 10% of the companies that applied for PPP got about 90% of the proceeds. Four hundred public companies received a billion and a half dollars. Government is supposed to prevent a tragedy of the commons. In this instance, I think we're going to find what we really did here was flatten the curve for rich people.

Additionally, it gave a short-term boost to the stock market during the campaign season, a boon for incumbents and especially, Donald Trump believed, to Donald Trump's re-election hopes.  The "tragedy of the commons" is not keeping many politicians- and certainly not this President of this age alive at night.

Ruhle cited the huge and famous independent New York City Strand Book Store, and Galloway noted that instead of giving wealthy business owners- who might nevertheless go out of business- gobs of money

I wonder if we would have been better off not giving them a million dollars just kicking the can down the road for owners who, quite frankly, can afford to take this kind of hit and just give $10,000 each to the individuals. As a general rule, Stephanie, where we've screwed up is you need to protect people, not companies. Small businesses are the lone wolves of the economy and we have turned them into the poodles waiting for a handout.

Moreover, many small business owners didn't apply for a loan because of the paperwork they'd have to take time out of their day to submit and the governmental bureaucracy they figured would stymie them if they did.

There are many reasons it was done this way. Direct aid to small businesses allows politicians to say "we care about you" and "small businesses" (and in less sophisticated times, the "small businessman") is next to godliness.  Business owners, as with ethnic groups and others, appreciate when the rich and powerful (seem to) directly address their needs. (Think Trump's "I love the poorly educated" or ostentatiously eating a taco bowl.) Aid to large businesses, especially powerful ones, has its own rewards for folks seeking, or attempting to retain, elective office.

Loaning or giving money to businesses rather than to individuals, as Galloway suggests, smacks of crony capitalism. That is a fairly good reason to alter alter our approach, and a good reason we probably won't.

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