> With speed as its strongest imperative, the effort run by the federal Small Business Administration initially lacked even the most basic safeguards to prevent opportunists from submitting fabricated documentation, government watchdogs have said.
> While that may have allowed millions of businesses to keep their doors open, it has also required a massive cleanup operation on the backend.
Frankly, I think that's exactly the right way to do it.
Speed was of the essence here - a lot of small businesses don't have much of a safety margin to go without revenue for even a few weeks. Consequences for abusing it don't have to be fast to work.
Agreed. I think people are already forgetting how frantic the first few months of the pandemic were, despite the fact that it was only a year ago. Governments around the world were placed in a no-win situation: they could do nothing and be criticized for allowing the economy to tank and causing mass unemployment, or they could throw together programs in a hurry without time to build safeguards around them deciding to fix it later. The latter was the right approach, in my opinion.
Here in Canada, we have a national unemployment benefits program (Employment Insurance, or EI). Like most such programs around the world, it was wholly unprepared for the volume of applications due to the March/April 2020 lockdowns. So, the federal government introduced the CERB (Canada Emergency Response Benefit), which was a flat $2000 monthly payment offered to anyone who attested they met the eligibility criteria. There was no verification because there wasn't time to put such a system in place without unacceptably delaying release of benefits. Of course, there was plenty of fraud, which the Canada Revenue Agency (Canadian equivalent of the IRS) is in the process of investigating and cracking down on after the fact.
IMO, this was exactly the right approach: time was absolutely of the essence. Get the money out, deal with the fraudsters later.
Consequences have to actually happen though. I don't see much evidence of that. They'll probably make an example out of the few most flagrant fraudsters but doing that basically screams "we don't care about the fraud as long as it's tactful".
Without consequences for the subtle fraudsters it just becomes a big-dig style feeding trough for the morally bankrupt which is the last thing we should be spending our tax dollars providing.
Exactly! When the government starts handing out money, we should expect a mix of legitimate and fraudulent applicants. I’d be shocked if literally anything else happened.
The key is to get the money quickly to the legitimate users and to ensure the fraudsters eventually do not benefit (and ideally suffer).
Eventual consistency is fine for the fraudsters, but you need immediate relief for the legitimate users.
For farms specifically? Or for most small businesses?
In that environment, what realistically was going to happen if someone didn't have money for a few weeks?
If you couldn't pay your rent - it's not like your landlord would immediately evict you. If you couldn't pay your suppliers, presumably, you wouldn't be able to place more orders - but if you were expecting a major cutback - you were probably planning to cut your orders.
What I don't get is... Everyone acts like it would've been the end of the world if we didn't stuff everyone full of money immediately.
Why would it have been?
I could see it would've been bad if 95% of people would've been able to carry on as usual, and a small number of businesses wouldn't have. They would've got evicted, put into bankruptcy, and so on.
Didn't EVERYONE have an interest in not putting EVERYONE into bankruptcy at the exact same time?
There are many ways we could have routed money back to businesses without using the byzantine process defined by the SBA.
This system benefitted banks at the expense of taxpayers, just like the last financial crisis.
One fairer approach would have been to just refund everybody's 2019 federal income taxes and let the market figure out how to use it. Instead, we propped up a bunch of businesses that failed anyway. But hey, the banks got a percentage.
Edit:
To add a disclaimer: I run two companies which each received both PPP loans. I benefitted. My employees benefitted. I still think it would have been fairer to give that money to individuals and not to business owners like myself.
Also, there is no reason we would have had to stop at refunding income taxes. That is just something that should have been ridiculously easy for the IRS to do quickly.
Everyone is defending the gov here. Fair enough. But I think most of you are being optimistic about the enforcement side of things. Probably billions of dollars of fraud were committed. They won't charge or prosecute even 1% of the fraudsters, either by capita or volume of fraud. We have a serious enforcement problem, and the root of that is that the gov is dealing with OPM (other people's money).
It's easy to cry "Somebody cheated! So the whole program was worthless." It's rarely true. Sure people cheat. We don't close stores because people shoplift, or shut down the insurance industry when a false claim is discovered.
The appeal to indignation is powerful, and the first tool used by bloggers and pundits.
I know of a business that asked for $15k, got 10% of that, and was gone within a month back when this stuff opened up. They needed $50k but they were trying to have civic awareness and dharma.
"Corruption" used to be understood as corrosive to society...
[+] [-] ceejayoz|4 years ago|reply
> While that may have allowed millions of businesses to keep their doors open, it has also required a massive cleanup operation on the backend.
Frankly, I think that's exactly the right way to do it.
Speed was of the essence here - a lot of small businesses don't have much of a safety margin to go without revenue for even a few weeks. Consequences for abusing it don't have to be fast to work.
[+] [-] Sanzig|4 years ago|reply
Here in Canada, we have a national unemployment benefits program (Employment Insurance, or EI). Like most such programs around the world, it was wholly unprepared for the volume of applications due to the March/April 2020 lockdowns. So, the federal government introduced the CERB (Canada Emergency Response Benefit), which was a flat $2000 monthly payment offered to anyone who attested they met the eligibility criteria. There was no verification because there wasn't time to put such a system in place without unacceptably delaying release of benefits. Of course, there was plenty of fraud, which the Canada Revenue Agency (Canadian equivalent of the IRS) is in the process of investigating and cracking down on after the fact.
IMO, this was exactly the right approach: time was absolutely of the essence. Get the money out, deal with the fraudsters later.
[+] [-] throwaway0a5e|4 years ago|reply
Without consequences for the subtle fraudsters it just becomes a big-dig style feeding trough for the morally bankrupt which is the last thing we should be spending our tax dollars providing.
[+] [-] sokoloff|4 years ago|reply
The key is to get the money quickly to the legitimate users and to ensure the fraudsters eventually do not benefit (and ideally suffer).
Eventual consistency is fine for the fraudsters, but you need immediate relief for the legitimate users.
[+] [-] onlyrealcuzzo|4 years ago|reply
In that environment, what realistically was going to happen if someone didn't have money for a few weeks?
If you couldn't pay your rent - it's not like your landlord would immediately evict you. If you couldn't pay your suppliers, presumably, you wouldn't be able to place more orders - but if you were expecting a major cutback - you were probably planning to cut your orders.
What I don't get is... Everyone acts like it would've been the end of the world if we didn't stuff everyone full of money immediately.
Why would it have been?
I could see it would've been bad if 95% of people would've been able to carry on as usual, and a small number of businesses wouldn't have. They would've got evicted, put into bankruptcy, and so on.
Didn't EVERYONE have an interest in not putting EVERYONE into bankruptcy at the exact same time?
[+] [-] unknown|4 years ago|reply
[deleted]
[+] [-] mcculley|4 years ago|reply
This system benefitted banks at the expense of taxpayers, just like the last financial crisis.
One fairer approach would have been to just refund everybody's 2019 federal income taxes and let the market figure out how to use it. Instead, we propped up a bunch of businesses that failed anyway. But hey, the banks got a percentage.
Edit:
To add a disclaimer: I run two companies which each received both PPP loans. I benefitted. My employees benefitted. I still think it would have been fairer to give that money to individuals and not to business owners like myself.
Also, there is no reason we would have had to stop at refunding income taxes. That is just something that should have been ridiculously easy for the IRS to do quickly.
[+] [-] jeffrallen|4 years ago|reply
The "technical unemployment" system used in done places in Europe is slightly more robust to these things, but only slightly.
I'm glad the governments acted quickly even with fraud as a result.
[+] [-] 55555|4 years ago|reply
[+] [-] JoeAltmaier|4 years ago|reply
The appeal to indignation is powerful, and the first tool used by bloggers and pundits.
[+] [-] h2odragon|4 years ago|reply
"Corruption" used to be understood as corrosive to society...
[+] [-] thoughtstheseus|4 years ago|reply
[+] [-] fdroidmstrrce|4 years ago|reply
Half of our city's daycares went out of business, I now pay an extra $5000/year.
And flattening the curve didn't save my 80 year old relatives.
Both red and blue team should be fired. Elect scientists that won't overreact at fractions of a percent.