It was only a matter of time until the Treasury released the list of recipients of the Paycheck Protection Program (PPP). The nearly $700 billion taxpayer-funded program was designed to keep workers on payroll, whereby recipients could pay their employees even for instances where the employee does not actually work. In the weeks ahead, we will undoubtedly continue to see more articles, such as this one in Forbes:
Billionaire Kanye West's Yeezy Received A Multimillion-Dollar PPP Loan
It sounds scandalous! Beginning with:
Kanye West’s fashion company Yeezy received more than $2 million through the Paycheck Protection Program (PPP) — he owns 100% of the company which Forbes estimates brought in close to $1.3 billion in 2019.
The absurdity of the money recipients is also noted by The Hill:
A luxury restaurant chain co-founded by actor Robert De Niro received as much as $27.7 million through 14 taxpayer-backed loans from the Paycheck Protection Program (PPP).
CNBC joined the analysis, providing a list of billionaires and country clubs which received small business loans from government:
Soho House, the exclusive membership club controlled by billionaire Ron Burkle, received loans totaling $9 million to $23 million by applying for seven loans.
The article reports that over four hundred country clubs and golf resorts received loans. After reading various news headlines, a pattern emerges whereby we are told about wealthy beneficiaries of taxpayer dollars but little else. It’s understandable to scoff at “the rich” when they're taking advantage of “the poor,” but the media remains misguided as to where they should point the finger.
We must remember that Congress created the forgivable loan program in the first place, funded by taxpayer money, supported by the Fed, to provide a direct incentive for small businesses to retain workers. It seems misplaced to be upset with the entrepreneur for receiving a “forgivable loan” for which they were eligible.
The PPP gives us an excellent opportunity to study problems with government social programs, as they almost always invoke a near-primal jealousy. Many take issue with something not considered “fair” according to their value judgement. Assuming Kanye’s company received $2 million and kept forty people on payroll, the program could be considered successful, since the objective was to keep workers employed. In fact, under socialism, compared to a hypothetical local pizzeria, which may only employ ten people, we can argue that Kanye is four times more deserving.
Kanye’s forgivable loan didn’t take away from other struggling businesses, as illustrated in the PPP June 30 report. There is still $131 billion left in the program. Surely, anyone who “needs” the money would have applied to the program by now.
The last wrinkle (which won’t be mentioned on any news outlet) is the $521 billion in approved loans, only $68 billion of which has made its way to the Fed’s balance sheet. Certainly, it’s possible everyone will voluntarily pay this money back. But what happens if they don’t?
Around $450 billion more dollars will be added to the Fed’s balance sheet, as no lending institution wants to keep a forgivable loan on its books. Either the loans will stay on the Fed’s book indefinitely, or more likely, the Small Business Administration (SBA, funded by the Treasury) will pay off the loan balances, possibly with money directly borrowed from the Fed through US Treasurys.
The media will point the finger at greedy billionaires to show how they took advantage of the weak and poor. We know better! The problem is not that the money went to the wrong people, but, rather, that the PPP exists in the first place. It shouldn’t matter whether one is rich or poor. Bad things tend to happen when central planners decide it’s best to pay people to do nothing, as allowed under the PPP. The effects will be both numerous and immeasurable, ranging from loss of purchasing power of the dollar, increase in asset prices and consumer goods, increase in national debt levels and an increase in disparity between the rich and poor…to name a few.
Ultimately, no matter how the hundreds of billions of dollars could have been allocated, and even if no billionaires had received this money, it is the poorest members of society paying for this program caused by nonsensical inflationary monetary policies seemingly understood only by a few.
