The SBA released loan-level details on the Payroll Protection Program, including the 661,219 loans in excess of $150,000. Our analysis of these files revealed a lot more thoughts and questions than just who got the money.
What stood out?
People are missing the real story. Most of the coverage is focused on the headline numbers, like the $521 billion that was paid out or the celebrities and politicians whose firms received loans. That’s not the story though - just like the obsession with the total number of coronavirus cases distracts from what is really happening on the ground, the obsession with these headlines distracts from how the money is being used.
There’s not as much detail as you’d expect. Once we started wondering how all this money was allocated, we realized many of the categories may be too broad to capture meaningful differences. For example, there’s nothing to distinguish between an establishment that remained operational and one which was forced to close.
Only when you zoom in on a local area does the magnitude of this program become evident. We used Ann Arbor, Michigan as a case study to help shed light on how the program may have impacted the area. In a city with a total population of about 120,000 people, the program claims to have retained 36,000 jobs.
Our Key Takeaways
Further analysis needs to be conducted on a local level to better determine the program’s efficacy.
The biggest winners of the program were not businesses, but states and politicians who (for the most part) were able to avoid both the optics and financial implications of overwhelmed unemployment offices. Despite these massive cash infusions, many of the borrowers (including restaurants or retail stores) are no better off than they were before. At best, they were able to retain some of their employees for reopening and their customers have retained some discretionary income.
If you wonder how the economy seems to have rebounded so quickly, look at the numbers in your community as an anecdote. Start counting which of the businesses and organizations you patronize - from restaurants and retailers to hospitals and architects - to see how cash was literally jammed into workers’ pockets at all levels of the economy.
Where will the inflation hit? We know these billions of dollars, coupled with the trillions of dollars in asset purchases by the Federal Reserve, will at some point contribute to higher prices. One could argue you’re already seeing signs of it in the form of house prices, which have continued to rise throughout the pandemic.
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