Corrupted: Those Left Behind

So far, Corrupted has focused on the pandemic profiteers of the coronavirus response—the powerful, moneyed, and well-connected interests that have grabbed more than their fair share of relief resources. Catch up on the first two editions of Corrupted.

In this issue, we’re focusing on those who have found it especially difficult to get relief, either because the government’s response has favored corporate interests over individual people’s needs, or because relief programs failed to help businesses in time before they folded. There are leftover relief funds and opportunities for new legislation, but it’s too late for some.

Jameian Selmon had to permanently shut down her event-planning business early in the pandemic as clients cancelled their weddings. She’s just one of about 440,000 Black business owners who had to close their doors permanently by mid-April. As another Black business owner told the New York Times, “it’s been a consistent rollercoaster trying to get help” weathering the pandemic. “As far as I know, most of the people that are in our area have gotten nothing or the bare minimum, and they’re still waiting,” Juliet Andersen, who owns two businesses in the Bronx, told the Times.

The COVID-19 pandemic has been especially devastating for Black, Hispanic, and Native Americans due to socioeconomic factors dating back decades and centuries, as well as for all low-income Americans.

So, while large companies, companies owned by billionaires, and businesses linked to political elites rapidly scooped up billions in relief loans and government contracts, those who were already at a disadvantage before COVID-19—and are enduringthe worst of the pandemic’s health and economic fallout—are left scrounging for crumbs.

A few simple comparisons illustrate just how unbalanced the relief effort has been. From March to mid-July, the federal government spent about $323 billion on unemployment benefits—far short of the $428 billion estimated payout calculated by Bloomberg News. With that spending added to the $300 billion allocated for cash payments to individuals whose income is under a certain threshold, the government spent about $623 billion total putting money directly in the pockets of struggling Americans.

The government meanwhile directed $650 billion to the Paycheck Protection Program and up to $500 billion to a few-strings-attached emergency aid fund for large corporations.

We just threw a lot of numbers at you, and at a glance the spending may not seem too lopsided. But things appear far less balanced when you look at how these funds have been disbursed.

Unemployment Benefits: Bottlenecks and Burdensome Paperwork

State unemployment insurance systems struggled to keep pace with the sharp uptick in claims. Analyses from the Economic Policy Institute and the Washington Post show that millions of Americans were unable to quickly access unemployment benefits in the early weeks of the pandemic.

This heart-wrenching story from Oregon Public Broadcasting details how some unemployed residents in Oregon have been waiting for months to receive much-needed benefits, repeatedly calling the state employment office to no avail. Concerned about mounting credit card bills and mortgage payments, many Americans across the country are still waiting. Now, the expanded benefits put in place by Congress have run out (as has an eviction moratorium) with no sign that lawmakers will reach a new agreement soon, and President Donald Trump’s recent executive order may only provide an additional three weeks of aid.

The country’s unemployment insurance infrastructure has long been neglected, leaving state unemployment offices ill-equipped to deal with the current crisis. Between 1999 and 2019, federal funding for unemployment insurance administration dropped 30% when adjusted for inflation, so states were unable to update their computer systems and maintain adequate support staff. And although the federal government allocated $1 billion to help states handle the recent surge of unemployment claims, states can’t be expected to overhaul their systems overnight.

The Trump administration has exacerbated the problem by making it more difficult for certain unemployed Americans to obtain benefits, while giving employers more leeway when applying for exemptions allowed by relief legislation.

In March, Labor Secretary Eugene Scalia, a former corporate lawyer, assured senators that expanded unemployment benefits would not hurt companies, and his agency quickly issued rules that restrict who qualifies for benefits. For example, gig workers are required to file burdensome paperwork to prove they qualify. By comparison, companies that qualify for an exemption from new paid family leave regulations are not required to file paperwork explaining why they must deny employees that leave.

Stimulus Check Slog vs. Loan “Concierge Treatment”

Many struggling Americans also had trouble receiving the first round of so-called stimulus checks. A Tax Policy Center study found that about 40% of Americans living at or below the poverty line reported that they had not gotten their checks as of mid- to late-May. And while nearly 74% of white adults received the payment, approximately 69% of Black adults, 64% of Latino adults, and 54% of Latino adults in families with non-citizens received one.

It turns out the program, administered by the IRS, inherently favored more well-off Americans by relying on recently filed tax returns or Social Security benefits for information on recipients. The poorest Americans, who are least likely to file tax returns or collect Social Security, had to provide their information to the IRS over a web portal. But a significant portion of that population lacks internet access at home, according to the Tax Policy Center.

Let’s compare that to the programs for businesses. Under the relief programs set up by the government, JPMorgan Chase was able to give its wealthiest clients “concierge treatment” in processing their government-backed small business loans, yet jobless and marginalized Americans were unable to obtain desperately needed cash because they lack internet access.

Adding insult to injury, powerful pro-business advocacy groups like the U.S. Chamber of Commerce and the Business Roundtable are aggressively lobbying Congress to not extend unemployment benefits in the next relief package, while the groups’ member companies eagerly snap up millions in pandemic relief.

Disadvantaged Business Owners Sidelined

Low-income and racial and ethnic minority Americans theoretically stood to get relief through programs for struggling businesses, but in practice, various institutional and programmatic barriers left many empty-handed.

As of mid-May, only 12% of Black and Latino business owners who applied for federal assistance received it, according to a survey conducted by Color of Change and UnidosUS. Looking specifically at the Paycheck Protection Program, a study found banks were more likely to recommend those loans to white business owners than Black business owners.

Immigrant-owned businesses and minority-owned farms also had a particularly hard time securing relief.

The Programs for Businesses Were Only So Effective

The Paycheck Protection Program was intended to help small businesses retain workers by providing loans, largely for payroll expenses, with the possibility of forgiveness if businesses met certain requirements. The program helped hundreds of thousands of businesses stay above water, yet the Washington Post documented several large companies that accepted millions in small business loans but still kept workers on unpaid furloughs.

Many companies that received the loans tried in earnest to maintain workers’ paychecks, but in many cases, the loans were simply not enough to survive on for more than a few months. So the loans were essentially “a Band-Aid on a bullet wound,” as one small-business owner told the Washington Post.

And while Paycheck Protection Program loans flew out the door, including to companies that didn’t appear to need them or that had lobbied for aid, two other programs meant to help businesses in need struggled to get off the ground.

The Economic Injury Disaster Loan small business relief program was beset by confusion, concerns about widespread potential fraud, and long wait times. According to the New York Times, the enormous demand led the Small Business Administration to cap loans at a fraction of usual levels.

And the Federal Reserve’s Main Street Lending facility, which was established to help mid-sized companies, got off to a slow start and has spent just a small fraction of its $600 billion budget. The program’s shortcomings were put under the national spotlight at a recent hearing.

Looking Ahead

Meanwhile, a new pandemic relief package is on hold with Congress locked in a partisan stalemate. As lawmakers consider additional relief legislation, they need to take a hard look at what’s worked and what hasn’t worked to help those in need. The CARES Act relief bill, passed in late March, was heavily influenced by corporate lobbyists, with special carve-outs and tax breaks favoring large corporations and specific industries.

Congress should also block any effort to turn Paycheck Protection Program loans into grants without a review of whether businesses used them as intended. If the government can recover funds from companies that didn’t need aid, it can use that money to help the many Americans who so far have been forced to navigate overburdened and poorly run programs.