Mark Cuban didn’t pull any punches in his assessment of the Paycheck Protection Program (PPP). He says the plan to provide businesses with forgivable payroll loans isn’t effectively reaching the consumer. He also mentioned that many businesses are choosing to simply shut down anyway.
Rather than payroll loans to businesses, the owner of the Dallas Mavericks and successful entrepreneur wants to see federal jobs programs and direct stimulus payments to keep the economy healthy. This time around, the government should stimulate the economy through “trickle-up economics”.
Not Down with PPP
In an interview with the Daily Brief on Monday, the businessman said, “It’s time to face the fact that PPP didn’t work… No amount of loans to businesses will save them or jobs if customers aren’t buying”.
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Some small business owners agree with Cuban’s assessment. As reported by Fox News, many small businesses would rather shutter and cut payrolls than accept the loans, which could leave them with a major debt burden after the pandemic ends. One reason is that these businesses don’t just have to pay their employees; their fixed expenses (such as utilities) also weigh heavily on their bottom line.
Staying open means taking on these costs against little or no revenue. Though the loans are forgivable if 75% is spent on payrolls, many companies still see closing as a more cost-effective option.
According to Cuban, we can’t effectively stimulate the economy by once again funneling the money through businesses. He says what we need today is “trickle-up economics”, directly providing consumers with jobs and cash. Consumers, he says, will make or break the economy during and after the pandemic.
Mark Cuban says PPP small-business rescue program failed
— Scott Wong (@scottwongDC) May 18, 2020
Cuban proposed two ways to spend federal funds in a better way. One proposal is a heavy investment in a jobs program.
On Twitter, he wrote:
“We need a transitional fed jobs program that trains and hires millions for a federal tracking/tracing/testing program as well as for support for at-risk populations, including long-term care. We need to dent unemployment with stable jobs.”
This idea is similar to FDR’s jobs programs during the Great Depression, such as the Civilian Conservation Corps, which put single young men across the nation to work. The logic behind the idea is that while many Americans are unemployed, many key jobs related to the pandemic remain unfilled. While logically sound, the federal government has a poor track record for job training programs.
Cuban’s other proposal is one that’s been gaining more traction during the pandemic: Universal Basic Income (UBI). While UBI is often touted as a permanent solution to growing inequality and shrinking job availability, Cuban only calls for it as a temporary cushion during the pandemic.
Cuban calls for direct cash payments to every U.S. household, to the tune of $1,000 every two weeks. This would go on for the next two months. However, Cuban’s proposal includes an important caveat: if you want to keep the money, you have to spend it in 10 days. This would ensure that the money stimulates the economy, rather than being socked away.
Ultimately, what Mark Cuban and many others want to see during the pandemic is an avoidance of yesteryear’s mistakes. Previous economic relief efforts have largely focused on giving money to businesses, or bailing out major corporations, with the idea that this money will eventually reach the consumer. Cuban wants to cut out the middleman, bringing jobs and stimulus funds directly to American households.