The Paycheck Protection Program: Paying People Not To Work?

The stimulus packages being handed out across this world provide us with an opportunity to document the anticapitalist process as it unfolds in real time, keeping in mind that when these inflation schemes fail, it will likely be blamed on capitalism.

My previous article discussed the $600 billion Main Street Lending Program (MSLP), which is very different from and not to be confused with the $670 billion Paycheck Protection Program (PPP). Whereas the MSLP grants between $1 million and $150 million in the form of a secured loan, the PPP only provides the lesser of $10 million and 250 percent of a borrower’s average monthly payroll costs. However, what is more concerning than the amount of the loans are the terms of the “loans.” Per the US Small Business Administration (SBA):

The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll).

In what may go down in history as one of the most aptly named loan programs ever, the “Paycheck Protection Program,” appears to be living up to its moniker; but is it a “real loan” or a loan in name only? Even worse, nowhere does it say that employees must work in order to receive the money. Rather, the SBA goes on to mention that “forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels.” Thus, not only does it make sense for the entrepreneur to maintain all staff, but the entrepreneur is also incentivized to maintain existing salary amounts as well, regardless of whether the employee works or not.

A recent Washington Post article said it best, citing a legal opinion to explain that

“the company can still choose to use PPP funds to pay that employee, even if the employee is not actually performing real work.”

But that doesn’t mean the loan is designed to pay people “not to work.”

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