Federal Government Should Be Doing More to Aid Small Businesses

A United States Chamber of Commerce Index survey on Small Businesses shows that their top priority for the Biden Administration is dealing with the coronavirus and the economy. Some two-thirds of small businesses nationally say they need more federal relief funds to help pay for employee salaries, operational costs and rent and utilities.

Basically, small businesses are needing a financial bridge to survive the pandemic so that they can be around to help reenergize the economy when normalcy returns.

The first Coronavirus Aid, Relief and Economic Security Act, also known as the CARES Act, allocated $2.2 trillion in federal relief funding of which $659 billion was designated toward the Paycheck Protection Program for small businesses.

The second relief package, the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 was signed into law on Dec. 27, 2020. It allocated $284 billion to go toward small businesses and to draw a second round of PPP loans.

Currently, under the Biden administration, lawmakers are still debating the amount of the third coronavirus relief package.

Time is of essence as many small businesses nationally report having about only three months in cash reserves and could close permanently within six months or a year if conditions remain the same.

This is code red for small businesses that are the heart of the nation’s economy.

What happened to the first round of PPP loans? While many business owners are grateful for the help, many also report that money has dried up, and yet, they are far from operating at full capacity.

First PPP was a failure
The first round of PPP was a first run of assistance of its kind and magnitude. It was wrought with errors. Many small businesses did not access funds before it ran out. The rollout was tedious and complicated. The computer systems were overwhelmed and delayed. And most damaging, there were abuse in that large mega companies received PPP loans designed for small businesses. Companies that questionably had not been affected by the pandemic also were receiving loans.

In the end, too many small businesses had closed down permanently because of the failures of the first round of PPP; and the most vulnerable businesses impacted by the pandemic like restaurants, retail and services did not get sufficient help.

In this second round of PPP that will run through March 31, there must be greater government oversight. There cannot be a repeat of big corporations eating up the funds, or questionable businesses that haven’t been truly impacted by the pandemic tapping into valuable resources. This is crucial especially since this round of small business assistance is considerably less than the first one.

Direct stimulus payment helps small businesses
Included in the second coronavirus stimulus package was a $600 direct payment that should have been at the very least the same amount as the first one. Direct payment to taxpayers helps to circulate money and gives the economy a mini-boost. Any help at this time matters.

During these times of austerity, that direct payment money is not going to rest in some savings account but be used to pay bills and buy essentials.

It’s arguable that direct payments should have been given each month and that this could have saved the economy from ruin. In Canada and parts of Europe where the coronavirus had not experienced widespread outbreak, their citizens received thousands of dollars in direct payment in the span of months.

With more frequent direct payments, even during lockdowns, consumerism would have continued. For example, restaurants could have only be serving take outs and people would be buying. Renters could have been paying their rent that also helps landlords.

Businesses and jobs could have been spared. Even Americans who have not lost their jobs at this moment are reluctant to spend because of economic uncertainty and job insecurity. Regular direct payments would have resulted in greater confidence.

Gap between first and second stimulus package was too long
To make matters worse, the months-long gap between the first round of aid (passed in March) up to the second (in December) was too long. This hurt small businesses and millions of struggling Americans. That blame should be square on the then GOP-controlled Senate (Mitch McConnell) who refused to take up the second package that the House passed. That second stimulus package sat there for months.

During that ninth-months gap, certainly at least another round of small business aid and direct payment could have been passed in July.

Where Hawaii’s small businesses stand
Two recent polls – the Pulse Survey and the Commercial Rent Survey – show the situation for small businesses in Hawaii is still dire. In the Pulse Survey, among more than 300 Chamber of Commerce Hawaii members, more than two in three Hawaii’s businesses are facing severe downturns in revenue, which in turn impacts jobs. In the Commercial Rent Survey, 65% of Hawaii businesses expect to close in 2021 without government help.

The Federal government is the only branch of government that can assume debt and should be doing more. In the context of the national economy being at par with the Great Depression, it’s inexcusable that almost a year into the pandemic, there has been only two stimulus packages to date.