Rubio urged by CEOs to think bigger about helping small businesses
But Bennet and Young face resistance over the cost of the proposal, which would likely run into the hundreds of billions of dollars, and concerns from union activists that it will offer too many benefits to companies that fail to pass the bill on. help. to workers.
“We need to broaden the ambition of the program,” Bennet said of Rubio’s proposal in an interview. “$ 100 billion in loans is a good start, but it won’t meet most of the need. The amount is significantly higher than that. “
How to target the next phase of business assistance is one of the key issues that congressional leaders will need to address in the coming days, in addition to unemployment insurance, corporate liability protection and support for businesses. state and local governments.
The protracted negotiations on the economic relief package have created an opening for Bennet and Young to muster additional support for their plan, which they have been promoting for months.
The proposal, which they dubbed the “RESTART Act,” would offer government-guaranteed loans to cover six months of payroll, benefits and fixed operating expenses. Part of the loans would be forgivable and the rest could be repaid over seven years. Businesses are expected to show a 25% loss in revenue. Employers with up to 5,000 workers could apply.
In contrast, the paycheck protection program that Congress created in March to avoid layoffs targeted small businesses – typically those with 500 or fewer employees. It covered a narrower range of expenses over a shorter period, forcing companies to spend the bulk of the loan on payroll so that the full amount was converted into a subsidy.
In his new PPP overhaul proposal, Rubio would tighten some of the restrictions even further.
He wants to allow businesses to apply for a second loan under the program. But his bill would only allow for employers of 300 workers or less who may also show a 50% loss in quarterly earnings from last year.
And if he took a page of Bennet and Young’s proposal by also offering a new 20-year loan, 1% interest that could be used on a wider range of expenses, the long-term “payback” loan. term would only be available for a set of struggling employers. It would focus on small businesses in low income communities and seasonal industries. They are expected to show a 50 percent loss in earnings and could not employ more than 500 people.
Bennet and Young say Congress should think bigger. They want Rubio to allow large employers to apply and say his earnings loss benchmark is too high. They also say that adding a forgiveness component is essential.
“We have a debate about the eligibility of companies,” Bennet said. “Part of it could be based on the competence of the Small Business Committee, which I respect and appreciate. … There are a lot of companies that are not the smallest companies that have been crushed here, and they employ a ton of people.
In a statement to POLITICO, Rubio said any additional federal relief must include long-term recovery funding for small businesses, especially those in underserved communities. “
“I appreciate the support of my colleagues for this approach, which has been included in the law. [Susan] Collins and I presented last week, “he said.” I will continue to work with my colleagues on both sides of the aisle on a federal small business relief program that includes a long-term payback loan that can be passed by Congress and enacted. by the president. “
One of the obstacles to the Bennet-Young bill is resistance to more spending – a major reason Republicans are struggling to push through economic relief legislation.
Young acknowledges the criticism, but says “doing this good” would likely require more than $ 300 billion in funding. He says that amount would produce more than $ 1 trillion in loans, about double what the Small Business Administration approved under the Paycheck Protection Program.
“I cannot stress enough that it would be financially irresponsible to allow these companies that were viable entities before the pandemic to go out of business,” he said. “The cost in purely fiscal terms would be enormous – not to mention the loss of innovation.”
Another complication is resistance from union activists who say Bennet and Young’s bill would offer too many advantages to companies that are not required to keep their jobs.
For example, their proposal would allow employers to use the loan proceeds to pay franchise fees. And while the bill includes restrictions on issuing dividends, it would provide a potential financial boost to businesses organized as real estate investment trusts (REITs) that could continue to pay profits.
Marty Leary, research director for hotel and restaurant union Unite Here, said the proposal would direct the money to “those economic players who employ few or no people and have the least need for funding. emergency, namely franchisors, real estate investment companies and their shareholders ”. Among the leaders urging Congress to pass the bill are leaders of the International Franchise Association, the National Restaurant Association, Marriott International and Choice Hotels International.
“The last thing we need is another program that claims to support jobs while directing low-cost financial resources and grants to areas of the US economy that are not directly involved in employing people,” and who have access or have already amassed enough cash to survive the pandemic, ”he said.
A young aide responded that while the bill allows more flexibility for businesses to use loans to get started, not all of these expenses are forgivable, including franchise fees. The aide said real estate trusts are required to distribute dividends to maintain their tax status, but if there is no taxable income there will be no distributions. The bill would only allow them to donate the minimum amount required under the tax code, the aide said.
While Bennet and Young’s proposal marks a move away from “paycheck” protections, Bennet said “it should have been more than payroll support all along.”
“The PPP was a great start,” he said. “I hope we come together on a strong enough package to make a difference for the American people and get us to the other side of this disaster. I really don’t think this is the time for half measures.