The $800 Billion Paycheck Protection Program: Where Did the Money Go and Why Did It Go There?
AbstractThe Paycheck Protection Program (PPP) provided small businesses with roughly $800 billion dollars in uncollateralized, low-interest loans during the pandemic, almost all of which will be forgiven. With 94 percent of small businesses ultimately receiving one or more loans, the PPP nearly saturated its market in just two months. We estimate that the program cumulatively preserved between 2 and 3 million job-years of employment over 14 months at a cost of $169K to $258K per job-year retained. These numbers imply that only 23 to 34 percent of PPP dollars went directly to workers who would otherwise have lost jobs; the balance flowed to business owners and shareholders, including creditors and suppliers of PPP-receiving firms. Program incidence was ultimately highly regressive, with about three-quarters of PPP funds accruing to the top quintile of households. PPP's breakneck scale-up, its high cost per job saved, and its regressive incidence have a common origin: PPP was essentially untargeted because the United States lacked the administrative infrastructure to do otherwise. Harnessing modern administrative systems, other high-income countries were able to better target pandemic business aid to firms in financial distress. Building similar capacity in the U.S. would enable improved targeting when the next pandemic or other large-scale economic emergency inevitably arises.
CitationAutor, David, David Cho, Leland D. Crane, Mita Goldar, Byron Lutz, Joshua Montes, William B. Peterman, David Ratner, Daniel Villar, and Ahu Yildirmaz. 2022. "The $800 Billion Paycheck Protection Program: Where Did the Money Go and Why Did It Go There?" Journal of Economic Perspectives, 36 (2): 55-80. DOI: 10.1257/jep.36.2.55
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G38 Corporate Finance and Governance: Government Policy and Regulation
- I12 Health Behavior
- J23 Labor Demand
- J31 Wage Level and Structure; Wage Differentials
- L25 Firm Performance: Size, Diversification, and Scope