The Paycheck Protection Program Ends in Confusion

Written by SK Ashby

The nearly $800 billion Paycheck Protection Program (PPP) which distributed forgivable loans to businesses to cover payroll costs during the coronavirus pandemic will finally end on Monday, May 31st, and while we know the program did save some jobs, we don't know exactly how many and we probably won't ever know.

Even if we never learn how many jobs the program saved, however, it seems fairly clear that we spent too much money on it. Each individual loan distributed under the program was relatively small, but the overall cost of the program was enormous.

Depending on who you ask, the program could have cost over $220,000 per job saved.

One of the most cited studies, led by a Massachusetts Institute of Technology economist David Autor, pegged the jobs saved by PPP’s first round at a fairly low 2.3 million -- at a high cost of $224,000 per job. At the other end of the spectrum, two Federal Reserve economists estimated in January that PPP preserved 13 million jobs at a more modest $43,000 each. [...]

About 46% of small businesses that had their PPP loans fully funded were forced to cut jobs at some point since March 1, 2020, while 71% of those that got no PPP loans said they reduced their workforce, according to a 2021 Federal Reserve survey.

Companies getting PPP loans, which were forgivable under conditions including spending a majority of the funds on payroll, were much more likely to try to rehire the workers later, the survey showed.

Costing between $43,000 to $224,000 per job saved is obviously a very wide spread. Assuming the truth is somewhere in the middle of those figures, we can say that the program cost more than most payrolls did.

Some businesses received PPP loans totaling in the millions, but the vast majority of the 11.6 million loans distributed by the Small Business Administration were relatively small in comparison. Most small business applicants received less than the projected cost of $43,000 per job and that's the most conservative cost estimate.

I've always said we should have sent the money directly to Americans in the form of additional stimulus checks and these estimates support that in hindsight. It would have been more equitable if we did.

Additional studies will tell us more over time, but right now it looks like we sunk nearly a trillion into this program and a large portion if not most of it was siphoned off by corporate middle-men and fraudsters. Legitimate small businesses owners who were helped by the program are undoubtedly thankful for it and I'm glad for them, but this is a lot of money we can't even account for.

It's not a direct comparison, but spending $800 billion on an unaccountable program during an emergency feels like we just spent a similar amount on unaccountable military contractors in Iraq again. A lot of the money is just gone with no recourse.