Three major governmental bailouts have occurred during recent memory, starting during the financial crisis of 2007-2008 and continuing through today. Three presidents were involved: George W. Bush, Barack Obama, and Donald Trump.
Since federal bailouts involved federal (taxpayer) money, all such expenditures should be transparent to the taxpaying public. Two of the three were, but the current extended bailout was mostly done with utmost secrecy.
Both the Bush and Obama bailouts were necessary to counter a man-made crisis—one that was caused by investment banks driving up the prices of low cost real estate. The Obama bailout followed after he took office. A fund of about the same amount was used to keep major automotive factories open. Knowledge of both of those bailouts was provided to the public.
Late in the fall of 2019 another crisis arrived, this time a natural one in the form of a new virus attacking humans in a city in China. The virus spread rapidly through the U.S., and early in 2020 was labeled a pandemic by the World Health Organization (WHO).
The country was basically shut down. Travel, especially international travel, was discontinued. Most businesses were closed, except for those considered essential.
In order to keep the economy viable, on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by Congress and signed into law. The bill made approximately $2.5 trillion available to provide relief to those most affected by the shutdown.
The bill had many parts. Probably the biggest, and most unusual part was a direct pay of $1,200 to every American earning less than $75,000 per year, with an additional $500 for each dependent child. Another part was to add $600 per month to the state unemployment insurance. Other funding was to make grants to the states to help compensate for the losses they would face due to the virus, supplementing the costs of locating and treating affected patients, beefing up jobless benefits, and providing loans (sometimes gifts) to endangered companies.
The Paycheck Protection Program (PPP), established under the CARES Act, was put under the leadership of Steven Mnuchin, with assistance of the Small Business Administration. This program, originally funded with about $660 billion of the original $2.5 trillion, provides small businesses with funds to pay up to eight weeks of payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities. The loan payouts are made through large national banks.
Both the CARES and PPP programs have been extended beyond their initial funding. And both operated under a veil of secrecy when they were first implemented. Later, Secretary Mnuchin allowed payouts exceeding $150,000 to be documented.
Acquiring the funding information led to an article in the July 7 Topeka Capital Journal that not all of the money flowed to needy small businesses. The list included manufacturing and construction firms. Another, “a large franchisee of Wendy’s, Taco Bell, and Pizza Hut restaurants, whose CEO is a major donor to President Donald Trump,” received between $5 million and $10 million.
Those receiving the big payouts accounted for less than 15 percent of all loans made through PPP. Other than the secrecy involved, most critics rate the PPP program a very big step in the right direction.
The CARES program is harder to assess. Much that has appeared in print has been criticism of the way the funds have been distributed. For example, the June 26 Topeka Capital Journal informed us that, relying on the IRS files from two years ago, more than 1 million dead people were sent the $1,500 checks to stimulate the economy. Although an Inspector General was appointed to oversee the expenditures, he was fired by President Trump almost as soon as he took office, and the president announced that he would oversee the funding himself.
CARES included a $500 billion fund for the bailout of “distressed large businesses,” including cruise lines, airlines, and oil companies. A Bloomberg blog listed several high dollar loans, including “Trump’s Waikiki Partner, Kushner Family,” “US Units of Chinese Companies,” along with many others with questionable connections to the president or his cabinet.
As taxpayers, it is our money that is being spent, and we have a right to know what it is being spent for. What we learned about PPP is very instructive. But what about CARES? Where has the money flowed? So far, it is estimated that over $3 trillion has been expended. Where is it going? Is it helping the rich campaign donors as well as the workers? We would like to know.