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t's hard to make a program like that quick enough to be effective without allowing fraud... Wasn't that the reasoning behind structuring PPP as loans? Get the

t's hard to make a program like that quick enough to be effective without allowing fraud... Wasn't that the reasoning behind structuring PPP as loans? Get the money out as a loan, then forgive/not-forgive later after the borrower submits paperwork proving the funds were used appropriately. It appears that second phase isn't happening - the government is just forgiving everything.

deleted 4y ago
[deleted]
panarky 4y ago
I don't know if that was ever stated as the rationale, but many people inferred that it was. It's a defensive inference, to defend our belief that authorities wouldn't attempt to solve a crisis by just transferring a trillion dollars from lower rungs on the economic latter directly to higher rungs on the ladder. We want to believe that the distribution of wealth is caused by individual behavior, that every person deserves their station in life however opulent or impoverished. We want to ignore the systems of power and privilege that exploit the low to further enrich the high. But PPP strips away even the veneer of fairness and lays bare the brutal mechanics of wealth distribution based on power instead of contribution or merit. Perhaps the reason PPP was structured as loans instead of grants was to maintain that fig leaf of fairness, to allow us to continue to defend the indefensible.
- Wyoming23 4y ago
  Do "we" believe any of that? Everything you're suggesting here is just standard left-wing political worldview wrapped in a narrative device of "we believe <the system works>, but really it doesn't". Also, ignoring fraud, wouldn't the flow of capital for PPP be primarily to the lower rungs, not from them? The money was to keep paying hourly wage employees in factories and retail while the business was shut down, right? Maybe I'm mistaken about how the program worked, but I thought it was essentially the government stepping in to provide funds for payroll.
  - Loughla 4y ago
    >Also, ignoring fraud, wouldn't the flow of capital for PPP be primarily to the lower rungs, not from them? The money was to keep paying hourly wage employees in factories and retail while the business was shut down, right? That's sort of the entire narrative here, though. In theory, you are correct. BUT - the "loans" being forgiven across the board is, essentially, removing the step where businesses prove that the money was used for what it was supposed to be used for. So, absent concrete proof, it is easy to speculate that this was just another wealth transfer to the top. Will we ever know? Probably not. But it's one more thing to throw onto the outrage bonfire for every side. It gives the left something to talk about (look at the wealth transfer to the rich). It give the right something to talk about (look at this gross overspend by the government). It gives the middle something to talk about (look at how smart we are knowing that this would happen). And it's all political theater. These are my opinions. Edit: that being said, look at the comments in this thread for literal arguments that are examples of every single point in that last paragraph.
  - panarky 4y ago
    That's a great example of the power of Orwellian naming. Only 25% of "Paycheck Protection" funds "trickled down" to workers, while 75% was hoarded by owners. If the objective is to get cash into the pockets of workers, you can just give it to them directly, and they'll get 100% of it. The only possible rationale for implementing a Rube Goldberg system like PPP is if you intend for the vast majority of the funds to get siphoned off by the wealthy long before it makes it down to workers.
    - vkou 4y ago
      > If the objective is to get cash into the pockets of workers, you can just give it to them directly, and they'll get 100% of it. That objective was achieved by opening up the unemployment taps. The objective of PPP was to prevent the destruction of half the businesses in the economy, which would have had knock-on-effects that would have taken years and decades to fully unravel. Think of the bullwhip effect in supply chains that everyone's been bitching about for the past two years. Now, multiply it times ten, because half the participants in the economy collapsed, and their replacements have not gotten their shit together yet, and won't for another five years. Businesses collapsing, and ~identical businesses re-opening next year destroys massive amounts of value. The value was in the human knowledge, connections, contracts, and relationships between them and their suppliers/customers. You lose all of that. PPP was a stop-gap measure to reduce the # of these losses.
Scoundreller 4y ago
I think the “loan” structure was to allow the corps to defer the revenue. It let them flush themselves with cash while claim a loss on paper and reduce/reverse their taxes that year.
- panarky 4y ago
  PPP payments are not "revenue" and they're not taxable income. Owners and shareholders can dividend this cash to themselves while still claiming operating losses.
gumby 4y ago
An existing program through the SBA was used as it was the fastest way to get cash out the door. That program happened to be a loan program, so they were structured that way with an almost automatic forgiveness. Think of it as an API adaptor.
- landemva 4y ago
  > the SBA was used as it was the fastest way to get cash out the door. Many non-savvy small businesses missed out in part due to lack of accounting help and lack of banking relationships for the application papers. If this was to keep employees working, then the fastest way would be to credit the employer payroll tax federal withholding back to the employer after the employer sent it to the Feds. That is an existing channel and would be based on verified employee pay withholding.
  - gumby 4y ago
    The could have even credited back more than the withholding (i.e enough to cover the wages). But not sure that would work: company might not have the cash flow to float the payroll, and perhaps it would have invited a different fraud? There weren’t a lot of tools and time was short. Would be worth thinking through for next time though. And let’s hope there isnt a next time.

deleted 4y ago

[deleted]

panarky 4y ago

I don't know if that was ever stated as the rationale, but many people inferred that it was. It's a defensive inference, to defend our belief that authorities wouldn't attempt to solve a crisis by just transferring a trillion dollars from lower rungs on the economic latter directly to higher rungs on the ladder. We want to believe that the distribution of wealth is caused by individual behavior, that every person deserves their station in life however opulent or impoverished. We want to ignore the systems of power and privilege that exploit the low to further enrich the high. But PPP strips away even the veneer of fairness and lays bare the brutal mechanics of wealth distribution based on power instead of contribution or merit. Perhaps the reason PPP was structured as loans instead of grants was to maintain that fig leaf of fairness, to allow us to continue to defend the indefensible.

Wyoming23 4y ago
Do "we" believe any of that? Everything you're suggesting here is just standard left-wing political worldview wrapped in a narrative device of "we believe <the system works>, but really it doesn't". Also, ignoring fraud, wouldn't the flow of capital for PPP be primarily to the lower rungs, not from them? The money was to keep paying hourly wage employees in factories and retail while the business was shut down, right? Maybe I'm mistaken about how the program worked, but I thought it was essentially the government stepping in to provide funds for payroll.
- Loughla 4y ago
  >Also, ignoring fraud, wouldn't the flow of capital for PPP be primarily to the lower rungs, not from them? The money was to keep paying hourly wage employees in factories and retail while the business was shut down, right? That's sort of the entire narrative here, though. In theory, you are correct. BUT - the "loans" being forgiven across the board is, essentially, removing the step where businesses prove that the money was used for what it was supposed to be used for. So, absent concrete proof, it is easy to speculate that this was just another wealth transfer to the top. Will we ever know? Probably not. But it's one more thing to throw onto the outrage bonfire for every side. It gives the left something to talk about (look at the wealth transfer to the rich). It give the right something to talk about (look at this gross overspend by the government). It gives the middle something to talk about (look at how smart we are knowing that this would happen). And it's all political theater. These are my opinions. Edit: that being said, look at the comments in this thread for literal arguments that are examples of every single point in that last paragraph.
- panarky 4y ago
  That's a great example of the power of Orwellian naming. Only 25% of "Paycheck Protection" funds "trickled down" to workers, while 75% was hoarded by owners. If the objective is to get cash into the pockets of workers, you can just give it to them directly, and they'll get 100% of it. The only possible rationale for implementing a Rube Goldberg system like PPP is if you intend for the vast majority of the funds to get siphoned off by the wealthy long before it makes it down to workers.
  - vkou 4y ago
    > If the objective is to get cash into the pockets of workers, you can just give it to them directly, and they'll get 100% of it. That objective was achieved by opening up the unemployment taps. The objective of PPP was to prevent the destruction of half the businesses in the economy, which would have had knock-on-effects that would have taken years and decades to fully unravel. Think of the bullwhip effect in supply chains that everyone's been bitching about for the past two years. Now, multiply it times ten, because half the participants in the economy collapsed, and their replacements have not gotten their shit together yet, and won't for another five years. Businesses collapsing, and ~identical businesses re-opening next year destroys massive amounts of value. The value was in the human knowledge, connections, contracts, and relationships between them and their suppliers/customers. You lose all of that. PPP was a stop-gap measure to reduce the # of these losses.

Scoundreller 4y ago

I think the “loan” structure was to allow the corps to defer the revenue. It let them flush themselves with cash while claim a loss on paper and reduce/reverse their taxes that year.

panarky 4y ago
PPP payments are not "revenue" and they're not taxable income. Owners and shareholders can dividend this cash to themselves while still claiming operating losses.

gumby 4y ago

An existing program through the SBA was used as it was the fastest way to get cash out the door. That program happened to be a loan program, so they were structured that way with an almost automatic forgiveness. Think of it as an API adaptor.

landemva 4y ago
> the SBA was used as it was the fastest way to get cash out the door. Many non-savvy small businesses missed out in part due to lack of accounting help and lack of banking relationships for the application papers. If this was to keep employees working, then the fastest way would be to credit the employer payroll tax federal withholding back to the employer after the employer sent it to the Feds. That is an existing channel and would be based on verified employee pay withholding.
- gumby 4y ago
  The could have even credited back more than the withholding (i.e enough to cover the wages). But not sure that would work: company might not have the cash flow to float the payroll, and perhaps it would have invited a different fraud? There weren’t a lot of tools and time was short. Would be worth thinking through for next time though. And let’s hope there isnt a next time.