I am not commenting on whether or not they should have been. I am not interested in tying them back to discussion of any other loans or loan forgiveness.
Why call them loans if they are not?
In: Economics
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they were technically loans, but there was a set of rules under which the balance could be entirely forgiven if met.
There were a bunch of rules and restrictions to make them forgivable. In practice these were not *hard* to achieve, but “it’s easy” is absolutely not the same as “it’s automatic” and those rules were designed to get the money spent in very specific ways. It’s a *lot* easier and faster to administer “here’s some money, you don’t have to repay it *if* you spend it on salaries” is compared to “please convince us in advance that you can have some money if you promise to spend it on salaries and also we trust you to spend it on salaries.”
There was criteria built in from the start for them to be forgiven.
The world was crazy in 2020, and a lot of stuff wasn’t very efficient. Part of the design of the program was that businesses would apply for PPP loans through their banks. Banks often had close-ish relationships with businesses- they could tell if a business was regularly sending money for payroll, getting deposits in for sales, etc. The thought in 2020 was that banks would be super efficient at getting businesses money so they didn’t fail, and money you apply for through a bank is often referred to as a “loan”.
Over time- eligibility got less strict, and a lot of people who didn’t really have small businesses defrauded the PPP program and got “loans”, but stuff happens.
They were loans, full stop. BUT, if you met certain requirements and did certain things with the money, then you didn’t have to pay back the loan. Structuring it this way allowed the government to inject that money into the economy and to direct at certain things, like payroll expenses, utilities, and rent. If you didn’t use the money in the specified ways, you were obligated to pay it back.
Two reasons:
(1) First of all, running these payments as loans backed by the small business administration allowed the money to be distributed quickly. That was a mechanism that was in-place. Anything else would have taken many months to set up.
(2) Various economists and other officials were concerned that the massive and sudden implementation of lockdowns would mean that many people would lose their jobs, and this loss would have a huge impact on the economy. The PPP loans were intended to make sure that didn’t happen, so the forgiveness was tied to companies NOT laying people off. Not all of the loans were eventually forgiven.
They were loans, but they had a set of criteria that allowed forgiveness. So if you used it to pay your employees and your suppliers, you were eligible to have them forgiven.
So let’s say that you ask your dad for $10 to buy ice cream. He tells you that if you get an A on my math test this afternoon, then it is forgiven. It’s still a loan, he is just incentivizing you to ace your test because it’s more important than getting paid.
Easier to “give” away gov’t money to people you want when you tell everyone it is not a give away but a loan. And when it is time, you blame anyone who is gone and say boy did we learn a lesson.
Because Ideologically Americans are very against the idea of “handouts.”
Whenever a handout is given, they have to come up with another word so it’s not communism or socialism.
Like the time the US treasury printed billions of dollars out of thin air to keep the country from collapsing financially, called it “Quantitative Easing” because that sounds better than “I just pulled a trillion dollars out of my own ass.”
My former employer got the PPP loan and furloughed us for 30 days and indicated the loan would be used to pay us for the time we were furloughed. We got back to work after the 30 days and they informed us that we actually would *not* be getting paid for the 30 days and that the PPP loan was being used to cover operational costs for that 30 days rather than on our paychecks.
Shortly after this, they started firing people because if they had laid anyone off after getting the loan, they would have had to pay back the loan with interest. So instead, they started making up reasons to fire people so that the PPP loan would be forgiven.
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