Making the Paycheck Protection Program Work — for Everyone

The Paycheck Protection Program (PPP), which pays 80 percent of payroll costs for businesses closed or otherwise impacted by shutdowns associated COVID-19, appears to be one of the more successful emergency responses to economic conditions created by the COVID-19 crisis. It is vastly preferable to keep workers attached to their employers than to hand them over to the tender mercies of unemployment insurance, and PPP has made that possible. Congress continues to tweak PPP to deal quickly with emerging issues, engaging in the kind of oversight and attention that is frequently lacking in other legislative initiatives.

One of the still-outstanding questions was the degree of flexibility businesses have in deciding how to use PPP resources. Yesterday, Treasury Secretary Steve Mnuchin confirmed that the amount that employers must spend on payroll to ensure forgiveness can be less than 60 percent, edging the program closer to a straight business support program as opposed to the more limited wage support program that was initially envisioned.

This additional leeway will help some businesses hit hard by the crisis that, as yet, had been unable to access PPP resources. As an example, restaurants in major urban areas tend to spend almost as much on rent as they do on wages. Without access to PPP, the effect on eateries and other small retail establishments could be catastrophic — one in five restaurants is considering permanently closing their doors. Minus today’s change, the more restrictive version PPP may be behind the failure of such firms to apply for support. According to recent reports more than $130 billion in PPP funding is still available despite vast unmet need in the business community. Lowering the payroll requirement to 60 percent, combined with other modifications enacted by Congress, can help more business and workers benefit from PPP, thus shortening the pathway from pandemic to recovery.  

PPP started well and has been improved by legislative fixes (such as providing additional resources and extending the deadline for use of funds) and administrative flexibilities like today’s announcement. When the program is mothballed at the end of the crisis, it will be worth evaluating what both the program — and the legislative and regulatory process by which it has been managed — can teach about how we treat other federal initiatives now and in the future.