When the Senate on Thursday voted to extend the nearly $1 trillion Paycheck Protection Program, there were few dissenters for a pandemic-relief program that lawmakers say has sustained tens of millions of small-business jobs.
Yet many economists say the jobs claim is exaggerated. And in reality, almost a year after the popular program’s launch, Congress, the Biden administration and even small-business advocates have no firm estimate of how many jobs it saved. Federal watchdog agencies say the data isn’t available, and academics offer a wide range of estimates for how much the extraordinary influx of spending — $961 billion was appropriated for PPP — supported the economy during the pandemic.
“No one has a really good answer,” Project on Government Oversight senior policy analyst Sean Moulton said.
That raises questions about how efficiently taxpayer funds were used in the Trump-era program, which has distributed more than 8 million forgivable business loans worth $718 billion since its launch last April. That concern will be heightened by the multitrillion-dollar rescue packages that President Joe Biden and congressional Democrats have pushed for the economy.
The Senate voted 92-7 on legislation to extend the program by two months, sending the bill off to Biden for his signature following House passage last week. The program has proved to be hugely popular because the government-backed loans delivered by thousands of lenders can be converted into grants if businesses maintain their payroll in the short term. Keeping workers paid was the priority. Congress later changed the rules to allow businesses to spend more of the funds on other expenses, meaning the program may have had a bigger effect helping firms stay afloat.
Some of the low-end estimates of PPP’s jobs impact suggest that each job “saved” — those otherwise at risk of disappearing — might have cost hundreds of thousands of dollars.
“It wasn’t like throwing it into a giant pit and setting it on fire,” said David Autor, a MIT economics professor who estimates that 2.3 million jobs were saved as of early June of last year, when half a trillion dollars had been approved for release. “It got transferred. It just wasn’t necessarily very well targeted.”
That matters because, while the economy is expected to rebound this year, the U.S. is still down about 9 million jobs compared to the month before Covid-19 shut down much of the country. Small businesses employ nearly half the American workforce, according to the Small Business Administration, which runs the PPP.
“The jobs numbers are consistent with the PPP having limited employment effects,” said University of Chicago associate professor of finance Eric Zwick, who estimates 3.5 million jobs were saved.
To be sure, academics disagree on the impact of the program.
One estimate by University of Maryland finance professor Michael Faulkender put the number of jobs saved in May at 18 million. Faulkender led the Treasury Department team that implemented the program with the SBA.
The discrepancy between Faulkender and other economists is related to different data sources they use. Researchers who have found relatively limited employment effects did so after comparing businesses that were eligible for the PPP to larger firms that could not access the program. Faulkender instead compared counties where businesses received PPP loans early versus those that received the funds later.
PPP funds relieved pressure on state unemployment insurance systems, which faced huge operational challenges, Faulkender said. He also points to the fact that the U.S. avoided losing jobs at all last May, when some economists were expecting 20 percent unemployment.
“We did not see the depths of what we could have seen and we recovered faster than we otherwise would have,” he said.
Economists who question the PPP’s impact say that it wasn’t narrowly targeted enough at businesses and workers that most needed the aid. Congress didn’t do that until December, when it tightened eligibility requirements before the PPP relaunched in January to focus support on the smallest, hardest-hit firms. But before lawmakers did that, they also loosened the program’s rules so that businesses could spend more funds on expenses like rent rather than payroll.
“It gave a lot of money to firms that did not really need it,” said John Friedman, a Brown University economics professor, who estimates that the PPP preserved 1.3 million jobs from April through August. “This money could have been spent in other, better ways to support families during the pandemic or address the public health issues.”
Federal watchdog agencies say the true effects of the program are difficult to measure. The SBA asks businesses to disclose their employee headcount and how they spent funds when they apply to have loans forgiven, which businesses have several months to file, but the agency has not yet disclosed job numbers for the 2.1 million loans forgiven so far. Congressional aides say they have not received the data, either.
In January, the Small Business Administration’s inspector general said in a report that the agency did not require borrowers to provide data on employees they kept and that it “cannot accurately report jobs retained by PPP borrowers.” The Government Accountability Office, an oversight arm of Congress, says reliable “jobs saved” information isn’t available in the SBA’s data.
“SBA officials and national leaders do not have enough information to make informed decisions or determine to what extent the PPP met national program objectives,” the SBA inspector general said.
Even with growing questions about the program’s impact, lawmakers from both parties and the Biden administration say it continues to play an important role in supporting the economic recovery. The PPP extension that the Senate passed Thursday — following a 415-3 House vote on March 16 — would delay the program’s application deadline to May 31 from March 31 without adding new funds. The SBA says $79 billion is still available to lend and will likely last through mid- to late-April.
The White House was also unable to provide analysis on jobs preserved thanks to PPP. National Economic Council deputy director Bharat Ramamurti said: “There’s value in keeping businesses going that are suffering from the pandemic through no fault of their own.”
“We have tried to implement the program in a way that really maximizes the efficiency of every dollar we’ve been given,” he said.
Senate Small Business Chair Ben Cardin (D-Md.) said he has heard from business owners throughout his state that the PPP was “essential in keeping their doors open and their employees on payroll during this pandemic.”
“While the program could have better targeted underserved and minority businesses, overall, it has been a lifeline for millions of small businesses throughout this country, who have used their ingenuity and creativity to survive this economic crisis,” he said.
Rep. Blaine Luetkemeyer, the Missouri lawmaker who negotiated the latest PPP extension as the top Republican on the House Small Business Committee, said recently on the House floor that the program “assisted or saved” 50 million jobs from April through August. It reflects a figure that the Trump administration released last year on the number of employees that PPP borrowers reported having when they applied.
In an interview, Luetkemeyer said he hadn’t seen estimates that the number of jobs saved was far lower. In his view, the 50 million figure represents “the number of jobs impacted.”
Luetkemeyer said the PPP has helped businesses facing a long recovery get “back on their feet more quickly and save those jobs so they don’t have to downsize and they can continue to give services to people in their communities.”
House Small Business Chair Nydia Velázquez (D-N.Y.) said the topline numbers “show the massive scope and reach of the program and just how many small businesses PPP has helped.” But she said the most important metrics for her are ones that show the extent to which loans are reaching vulnerable businesses. She cited the average loan size, which is about $64,400 for this year’s round of PPP compared to $101,000 last year, indicating that smaller businesses are taking advantage of the program.
“The spread [in estimates of jobs saved] tells its own story,” one Senate Small Business Committee Democratic aide said. “No one really knows what’s going on at this point.”