The New York Times - USA (2020-08-07)

A10 N THE NEW YORK TIMES, FRIDAY, AUGUST 7, 2020

Tracking an OutbreakThe Stimulus

no jobs to return to, and the strug-
gling businesses that employed
them?
The numbers are already dire.
On Thursday, the government
reported that nearly 1.2 million
Americans filed for state unem-
ployment benefits last week — the
20th straight week that new job-
less claims have topped one mil-
lion, although it was the lowest
weekly total since March. Econo-
mists estimate that 30 million
Americans are unemployed. By
the time the economy gets back on
track, which could take months if
not years, entire industries — es-
pecially restaurants, bars, hotels,
movie theaters, concert venues,
gyms and other fields dominated
by small businesses — could be
decimated, shrinking the pool of
available jobs.
So far, there is little agreement
in Washington about how to con-
tinue to help millions of flounder-
ing businesses. Lawmakers are
considering extending the P.P.P. in
some form. Senate Republicans
have proposed letting companies
whose sales have fallen by 35 per-
cent or more get a second loan.
Other ideas kicking around in
Congress include expanding ex-
isting low-interest loan programs
offered by the Small Business Ad-
ministration and increasing tax
credits for companies that retain
workers. Lobbyists are also plead-
ing for bailouts for specific hard-
hit industries.
“There’s absolutely a need for
more help in some industries,”
said Carson Lappetito, president
of Sunwest Bank, a regional lend-
er based in Irvine, Calif., that has
made more than 2,000 P.P.P. loans.
“In the hotel and restaurant and
hospitality sectors, those areas
have been completely ham-
mered.”
Sunwest, like many other banks
that were the main conduits

through which P.P.P. money flowed to small-business owners, stopped making loans weeks ago. Mr. Lappetito said demand had fallen off and the bank wanted to focus on other business areas. On Monday, when the S.B.A. begins accepting applications from banks to have their small-business loans forgiven, the complex- ities of the process are likely to further bedevil lenders and borrowers. Sunwest has around 100 forgiveness applications from borrowers that it’s currently re- viewing. Small businesses employ nearly half of America’s nongov- ernment workers, and the paycheck program preserved at least 1.4 million jobs through early June, a recent economic analysis concluded. More than five million companies received loans, aver- aging $102,000 each. There was a frenzied rush when the program began in April: The fund’s initial $342 billion ran out in just 13 days, stranding hundreds of thousands of applicants and prompting Congress to add another $310 billion. A chunk of it went fast, but months later, more than $125 billion remains unspent. Lenders said demand slowed because nearly every eligible business that wanted a loan was, in the end, able to get one. But as the economic downturn became prolonged, strict rules about how the cash could be used also made P.P.P. loans less attractive for some business owners. For a loan to be forgiven, most of the money had to be used to pay workers, rather than on other expenses like buying protective equipment or renovating spaces to accommo- date social-distancing rules — which became more important for businesses trying to adapt to the new reality. Jon Winick, chief executive of Clark Street Capital, a firm that advises lenders, called the program a “successful bipartisan ef-

fort.” It was created in a hurry based on expectations that the economic recovery would be “V- shaped” — with a sharp dip, followed by a sharp rebound within a brief period — that eventually proved wrong, he said. However, the program “did provide a bridge for thousands of businesses to stay in the game long enough to make it to the other side,” Mr. Winick said. A bridge was exactly what the relief loan provided for Bob Starekow, the co-owner of two restaurants in Frisco, Colo., a resort town with heavy winter and summer tourism. The P.P.P. loan he got in May allowed him to keep paying his 28 workers while his restaurants, the Silverheels Bar &

Grill and Kemosabe Sushi, were closed. They reopened in June, and business is running profitably, although at a smaller scale, Mr. Starekow said. To cut costs, he slashed his menu. His restaurants could seat about 200 people in- doors, but are now mainly using their 90 outdoor seats. Mr. Starekow has not had to lay any- one off, but he has not hired the 20 or so additional people he normally would to handle the summer demand. He worries about what cooler weather will mean for foot traffic. “I’m not concerned about up or down with revenue,” Mr. Starekow said. “I’m concerned about broke or not broke.”

Mr. Starekow thinks he can make it without more government aid, but others said they would welcome another P.P.P. loan if it were available. At A&J Trans- portation, a trucking company in Ada, Okla., sales are down sharply from last year, and the company is struggling to stay in the black. A&J got a $699,000 loan in April and used it to keep paying more than 70 drivers through early June. But after the money ran out, around 30 drivers quit. A&J, which used to work exclusively on oil fields, shifted to over-the-road trucking after the pandemic shut down the state’s oil production. Many of its drivers — who had mostly been paid to stay home while the company hunted for

new contracts — did not want to do long-haul work, said Dana San- ford, the company’s office man- ager. Now, the company is desperate for workers. “Any driver that wants a job, we’ll give them one,” Ms. Sanford said. If A&J got another loan, she said, the company would use it to meet payroll costs and free up money for other expenses. Mr. Bodenstein also said a second round of funding would be a godsend for his day care center. For the two months it was closed, his school had zero revenue, but his landlord refused to defer or discount the space’s $30, monthly rent. Utilities, insurance and other expenses add $10, more to his monthly overhead. A $150,000 disaster loan from the S.B.A. helped him catch up on bills and stave off the eviction notice his landlord sent after he fell two months’ behind, but he’s still trying to dig out from the crater left by the shutdown. Mr. Bodenstein also got caught by a midstream change in the P.P.P. rules, one of many that have frustrated both borrowers and lenders. Congress initially re- quired that borrowers seeking to have their loans forgiven spend all of the money within eight weeks. So Mr. Bodenstein did what Con- gress intended: He paid all of his workers to stay home while his business was shut, and kept them off the unemployment rolls. But Congress later loosened those rules, allowing borrowers to instead take months to bring back their employees and use their loan funds. By the time that change happened in early June, Mr. Bo- denstein had already spent his money. “I felt like it was unfair,” Mr. Bo- denstein said. “Those of us who did the right thing and followed the spirit of the program were pe- nalized.”

PAYCHECK PROTECTION PROGRAM

For Struggling Small Businesses, a Government Lifeline Runs Short on Rope

Ken and Kristen Bodenstein had to lay off workers when the paycheck protection aid ran out.

CHRISTOPHER CAPOZZIELLO FOR THE NEW YORK TIMES

From Page A

WASHINGTON — Top Demo-
crats and the White House
clashed anew on Thursday over
an economic recovery package as
a jobs report loomed over stalled
negotiations on the plan, raising
the stakes of an agreement even
as a compromise appeared to be
nowhere in sight.
Grasping for leverage, Presi-
dent Trump threatened to act on
his own if no bipartisan deal could
be reached, telling reporters that
he could move as soon as Friday
or Saturday to sign executive or-
ders to forestall evictions, sus-
pend payroll tax collection and
provide unemployment aid and
student loan relief. But it was not
clear that he had the power to do
so without Congress, which con-
trols spending, or that any set of
executive actions could stabilize
an economy devastated by the
pandemic.
After more than three hours of
talks in the Capitol Hill offices of
Speaker Nancy Pelosi, negotia-
tors emerged without an agree-
ment and said stark divisions re-
mained. Ms. Pelosi, of California,
described a “consequential meet-
ing” where “we could see the dif-
ference in values that we bring to
the table.”
“We’re very far apart; it’s most
unfortunate,” she added after the
meeting. Senator Chuck Schumer
of New York, the minority leader,
said he urged the officials negoti-
ating on behalf of the administra-
tion, Steven Mnuchin, the Treas-
ury secretary, and Mark Mead-
ows, the White House chief of
staff, to “meet us in the middle,”
and work to settle significant pol-
icy divisions, even as lawmakers
conceded that they were not close
to such a resolution.
Ms. Pelosi accused Mr. Mead-
ows of slamming the table during
the meeting, though Mr. Meadows
denied doing so.
“We’re still a considerable
amount apart in terms of a com-
promise that could be signed into
law,” Mr. Meadows said after the
meeting, adding, “We’re willing to
stay engaged, but I can tell you
that the differences are still signif-
icant.”
Democrats, who are pressing a
$3.4 trillion package, assailed the
Republicans, saying their offers
had not come close to meeting the
needs of Americans struggling
through historic economic and
public health crises.
In an interview with CNBC on
Thursday, the normally genteel
Ms. Pelosi said of Republicans,
“Perhaps you mistook them for
somebody who gives a damn.”
“Why are we holding America’s
working families who are strug-
gling, who have children to care

for, senior elders to care for and the rest, and make it as if they’re — my goodness — they’re not worthy of this?” she told reporters later at the Capitol. With no agreement at hand, lawmakers in both chambers have now left Washington, with the promise of 24 hours’ notice before any vote on a recovery package, which negotiators had hoped to reach before the end of the week. Lobbyists and some congressional staff members increasingly fear the developments are raising the possibility that lawmakers will be unable to bridge the yawning policy divide on a new economic stimulus bill. Some expressed worries on Thursday that Demo- crats would abandon negotiations if Mr. Trump chose to follow through with his threatened orders, some of which Democrats have called illegal and which they could challenge in court. But a White House official said lawyers there believed the president would be on solid ground to act on his own to repurpose funding provided in the last stimulus measure. On his way to board Air Force One for a flight to Ohio on Thurs- day, the president told reporters that he expected to sign the orders “probably tomorrow afternoon”

or Saturday morning, though he left open the possibility of a bipartisan deal instead. A breakdown in negotiations, even one that ends with Mr. Trump taking unilateral action, could particularly hurt small businesses — which have largely run through the aid lawmakers ap- proved for them this year, with a loan program to assist them slated to lapse at week’s end — and state and local government workers, who could face mass layoffs as budget shortfalls widen. Looming over the talks on Thursday was the anticipation of a new monthly jobs report that could influence the trajectory of negotiations. The Labor Department will report Friday morning on how many jobs the economy created in July, as the United States climbs back from the depths of the pandemic recession. Forecasters expect a slowdown from May, when the nascent recovery added 2.7 million jobs, and June, when it added 4.8 million. That is because the re- surgence of the coronavirus has cooled off growth in consumer spending and business activity for much of the summer. If Friday’s report shows a dras- tic slowdown in job creation, while the economy remains down more

than 10 million jobs from its prepandemic peak in February, pressure will rise on Mr. Trump and congressional leaders to cut a deal to provide additional aid for struggling small businesses, laid- off workers and state and local governments that are facing large shortfalls in tax revenue. “It’s so clear that we should do something, and we should do

something big, and we should do it in a way that is bipartisan as we have done every other bill,” Ms. Pelosi said after the meeting. Republicans, for their part, blamed Democrats for what they described as an unwillingness to compromise on a number of criti- cal fronts, like agreeing to liability protections for businesses or accepting a lower level of funding for schools that are already starting the academic year. They re- mained bitterly opposed to Demo- crats’ demands for hundreds of

billions of dollars for food aid, elec- tion security and the Postal Serv- ice. “A lot of Americans’ hopes — a lot of American lives — are riding on the Democrats’ endless talk,” said Senator Mitch McConnell, Republican of Kentucky and the majority leader. “I hope they are not disappointed.” It is all but guaranteed that a popular small-business loan program will stop accepting applications at the end of the week, be- coming yet another casualty of the faltering negotiations. And it appeared likely that the talks would stretch into next week. Mr. Mead- ows said he would host a daily conference call next week with Republican senators to keep them updated on the progress — or lack thereof — of negotiations. The persisting impasse has prompted the president and his lieutenants to double down on the threat of unilateral executive action, including addressing a lapsed federal unemployment benefit and Mr. Trump’s demands for a payroll tax cut. (At least one Republican senator, Charles E. Grassley, the chairman of the Fi- nance Committee, expressed skepticism about whether a payroll tax cut was warranted with millions of Americans unem-

ployed.) Democrats could challenge some of those actions, though Ms. Pelosi said on Thursday that she would welcome an eviction mora- torium order, provided there was additional rental and housing as- sistance attached. Speaking to reporters after the meeting, Mr. Schumer cautioned that executive orders “will be litigated in court, and be awkward and difficult to implement.” Mr. Mnuchin said the president, who checked in with his deputies three times during the meeting, viewed the executive orders as a last resort and instructed them to work toward a deal that could be- come law. But a better-than-expected jobs number on Friday could sway Mr. Trump — who has repeatedly said that the rebound from the recession is well underway — against agreeing to any more of Demo- crats’ demands on issues like re- viving the now-expired $600-per- week federal supplement for unemployed workers. Both Ms. Pelosi and Mr. Schumer have repeatedly rejected any Republican proposals that would curtail that benefit in favor of a new, likely more complex system or an over- all lower weekly sum. It could also embolden the fac- tion of the Senate Republican cau- cus that is pushing for no additional federal deficit spending. But some analysts in Washington say even a particularly brutal jobs report could complicate negotiations, because Republicans may cite it as a sign that the additional unemployment benefits that had been in place through the end of July were so generous that they deterred laid-off Americans from returning to work. A string of recent studies have found the opposite: that the additional income from the benefits has propped up consumer spending and bolstered the economy, without discouraging workers from taking jobs if offered. Analysts have raised warnings about a possible letdown in the jobs report this week, particularly after a sharp drop in the private- sector job growth that the private payrolls firm ADP reported on Wednesday. “We believe the labor market reached an inflection point in July,” economists at Nomura wrote this week in a research note in which they forecast a gain of 550,000 jobs in July, “starting what will likely be a slower phase of recovery.” Mr. Trump, speaking to Fox News on Thursday, predicted a “big number” from Friday’s report. Presidents have the ability to see jobs numbers a day ahead of their release, but an administra- tion official said Mr. Trump had not seen the report before making his remarks.

CAPITOL HILL

Deal on Rescue Plan Between Trump and Congress Is Nowhere in Sight

Speaker Nancy Pelosi and Senator Chuck Schumer in the Capitol on Thursday. Democrats are pressing a $3.4 trillion aid package.

GABRIELLA DEMCZUK FOR THE NEW YORK TIMES

By JIM TANKERSLEY and EMILY COCHRANE

Economists are

warning of new signs

of a lagging recovery.

Annie Karni contributed report-
ing.

The New York Times - USA (2020-08-07)

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