WASHINGTON–The questions raised by the nation’s credit unions in promoting and making Paycheck Protection Program (PPP) loans to date have largely been technical and administrative—but now some economists are asking a bigger question—has the half-billion-dollar program worked?
Economists with the Treasury Department have stated the program may have saved as many as 19-million jobs. But a group of academic economists who have studied the program have concluded it has saved relatively few jobs and that, given its cost, it has been far less efficient than other government efforts to help the economy, according to the New York Times.
“A very large chunk of the benefit went to a very small share of the firms, and those were probably the firms least in need,” David Autor, an M.I.T. economist who led one study, told the Times.
According to the Times, the divergence in views over the program’s economic payoff stems in part from ambiguity about its goals: saving jobs or saving businesses.
Using different methodology than the Treasury economists, Autor told the publication the PPP saved between 1.4 million and 3.2 million jobs. Other researchers have offered broadly similar estimates, the Times reported.
Maybe Not a ‘Success’
“Given the program’s cost, saving jobs on that scale doesn’t necessarily qualify as a success. Unemployment benefits also provide income, at far less expense, and programs like food assistance and aid to state and local governments pack a larger economic punch, according to many assessments,” the Times reported. Autor told the Times he compared companies with just under 500 employees — which could qualify for the program’s original version — with those just above that size, which could not. If the loans were a big help, then the smaller companies should have retained many more of their workers. Instead, Autor found little difference between the two groups, the New York Times reported.
“But some economists argue that such research understates the program’s impact because it fails to focus on the smallest businesses, which were less likely to have large cash reserves or other financing,” the Times noted.
One Counterpoint
But the reported also pointed to another paper based on a survey of businesses in Oakland, Calif., which found those receiving PPP loans were 20.5% more likely to say they expected to survive six months — but that the relatively greater optimism was limited to businesses with fewer than five employees.
Beyond the smallest businesses, from a macro view, the PPP was and is “really inefficient use of funds,” Eric Zwick, an economist at the University of Chicago’s business school, told the Times.
Yet other economists told the Times the value hasn’t so much been in jobs saved, but businesses saved. And on that basis, they say, it helped prevent a greater calamity and fostered economic healing, the Times reported.
“A major goal was to keep these businesses alive so that when the economy started to recover and then the economy reopened, there would be businesses around to hire unemployed workers,” Michael R. Strain, an economist at the American Enterprise Institute, a conservative think tank, told the Times.