Most expensive federal ‘stimulus’ package has failed minority communities terribly, new analysis finds
AT $ 6 trillion and over, the scale of the federal government’s spending on COVID-19 is truly unprecedented. In exchange for spending so much, an astonishing $ 42,000 per federal taxpayer, politicians promised their programs could save the day. But one new analysis shows that the most expensive federal stimulus, the Paycheque Protection Program, unfortunately did not help minority communities and those who needed it most.
Here is the background.
the $ 828 billion was designed to provide “loans” (which usually do not need to be repaid) to small businesses struggling to stay afloat in the face of government-imposed shutdowns and the resulting economic downturn. It was quickly exploited by large, well-connected corporations and later ravaged by rampant fraud. Search for an economist from the Massachusetts Institute of Technology valued that the program cost taxpayers $ 224,000 per sheltered job.
Now we know he was also plagued by creeping racial disparities.
“[An] analysis of more than 5 million PPP loans revealed widespread racial disparities in the way these loans were distributed ”, Los Angeles Times reports. “In the vast majority of metropolitan areas with a population of 1 million or more, the loan rate for predominantly white neighborhoods was higher than that of any predominantly Latino, black or Asian neighborhood.”
The newspaper notes that in Los Angeles, “businesses in predominantly white neighborhoods received loans at a rate twice that of predominantly Latin American census tracts, 1.5 times the rate for businesses in the Latin American areas. predominantly black and 1.2 times the rate in Asian areas.
Many minorities have been overlooked by federal aid efforts. Annie Graham, black entrepreneur and boutique owner struggled tremendously during lockdowns. Her sales now consist mainly of people buying dresses for funerals, and she struggles to keep her business afloat. But she was refused a PPP loan, and in her neighborhood, PPP loans were only granted to 32% of businesses.
“For me, not being able to get help is hurtful, that’s all I can say,” she told the Los Angeles Times.
Of course, it’s not as if there is active racial animosity or conscious discrimination at the root of these disparities. It is more that the program was co-opted by better positioned and better-off companies, and this had a disproportionate effect on the poorest minority communities. A congressional report found that many banks “were processing large PPP loans for larger existing customers … more than double the speed of small loans to the most needy small businesses.”
What makes this particularly unfair is that the government lockdowns the PPP was supposed to compensate for, hit small minority businesses hardest.
“African-American businesses have been hit particularly hard, dropping 41%. [Latino] business owners fell 32 percent and Asian business owners fell 26 percent, ”according to research by a Stanford University professor. find. For context, white business owners faced a 17% drop.
So, yes, the P3 has helped some business owners. Still, the benefits have been overstated and haven’t gone to those who need it most. Given the huge cost of the initiative, it increasingly appears that protecting paycheck protection was a political victory for Congress, but a gross business for taxpayers.
Brad Polumbo (@Brad_Polumbo) is a Washington Examiner contributor and host of Breaking down boundaries Podcast.