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Comment by rory | Hacker News Reader

I know a few upper-middle class small business owners (all non-retail sectors) whose businesses weren't substantially affected by the pandemic, but who basically got a free handout as part of the program.

Two mentioned how they were initially hesitant to apply for money, but then worried that if they didn't, their business could take a downturn after it was too late. Then as long as they spent the money on payroll (which they had to pay for anyway), they didn't have to pay it back, even if their business didn't show any losses. I shudder to think of how much the bigger players yanked out of it.

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I was doing some work for a $30MM/yr ecommerce retailer whose business was up 30% YoY pre-pandemic and began a trend of doubling in April 2020. They were still hiring and got ~$600k for free. Another $50MM/yr company had flat/slightly up revenue and got $1.2MM. Both companies are notoriously stingy with W2 worker pay and bonuses, and remained so even after getting bailouts.

The bulk of the funds should have been allocated to retailers and restaurants that were literally forced to close by local and state orders.

Funds that went to large non-retail businesses, like airlines, should have had far more strings attached. As the CARES Act was written, it placed a 12 month moratorium on stock buybacks, dividends, and executive pay increases but allowed those restrictions to be waived by the Fed and/or Treasury on a case by case basis, and they often were waived. Those restrictions should have had a time horizon closer to 5 years, and no waivers should have been permitted.

In many ways, this mirrored the bank bailouts of 2008-9. If the government is going to save your corporation from extinction, then it needs to receive something in return - at a minimum, shareholders need to take a haircut as they would in a bankruptcy proceeding. The policy objective should have been to protect the overall economy from the demise of critical industries, not the preservation of existing shareholder wealth.

For a counter example: in Germany business subsidies for COVID excluded payroll, which for many service businesses meant it wasn't worth applying. The idea was that payroll expenses could already be reduced by sending people home using the short-time work subsidies, which goes something like this: you reduce an employee's hours by X% and the government pays the business XY% of the employee's salary.

In practice this meant small, founder-led service companies were hit harder because working business owners couldn't take advantage of this and cutting hours also meant not being able to invest as much time in rebuilding or pivoting. Additionally the subsidies also barely covered stocking expenses (e.g. for losses from perishable goods expiring during lockdowns) so the only type of business that really benefited were medium scale companies with enough financial reserves to survive sending every employee home while the subsidies would cover a large chunk of recurring business expenses, i.e. mostly manufacturing companies.

There were also some additional subsidies but they used almost surgical precision to similarly limit who could apply, e.g. solo entrepreneurs without employees (but again, not covering payroll) or companies that had more than X% of employees working at least Y% short-time while also having at least one employee out of short-time mentoring someone in a job training, or a tax rebate for companies paying out "COVID bonuses" to employees (which in practice just translates to giving tax subsidies to large companies paying out bonuses to senior executives in the middle of a pandemic).

If you don’t show losses, and the loan was forgiven, it becomes taxable revenue. As a C corp, Trump got those taxes down to 21%, so it was only mostly free.

Uncle Sam done gone shopping again and left his cart at the store.

It does not become taxable revenue - this was changed in one of the later stimulus rounds. Here is a random source to this effect:

https://rsmus.com/what-we-do/services/tax/state-and-local-ta...

Not true. On Dec 27, 2020, they made it all deductible

A friend worked for a company that used the Canadian equivalent during a period of record growth. As they doubled their headcount, they got the gov to pay for it all.

and it still took me 2 years to find a job, not even in Canada! GG

Friends I know run a small Canadian documentary film production company. They received a hefty chunk of change in the early days of the pandemic that they really didn't need.

Was this around the CERB time?

We felt a bit guilty taking some of the money from the handout, until we saw how much more all the companies around us took. It all got snatched up as quick as companies could adjust their numbers to qualify.

While we were affected by a reduction in orders at beginning of the pandemic , we would have survived without layoffs anyway. But we decided to take the money and hold on to it in case the situation got worse. Now we’re sitting on a pot of gold that is supposed to help our workers from losing their jobs, but our current biggest labor issue is short staffing.

Pay more with that pot of gold you're sitting on?

We are absolutely paying our people more, just gave everybody raises. But can’t get new people even when we offer more.

Probably still underpaying then, aren’t you?

And giving everyone raises after a record year of inflation isn’t exactly a headline statement. It’s more like - “our workers would have made less this year than last year if we hadn’t given them raises… and probably would’ve quit. So, we had to give them raises.”

"I went to the market and offered $2 for a loaf of bread - the shopkeeper said no. So I offered $3, but he still said no. This must mean that no amount of money could possibly buy a loaf of bread and not that the price of bread has risen above what I offered."

It seems like you have a problem and a solution both staring right at you.

I got a free handout as an employee without my job being affected by the pandemic at all. Missing chips currently do affect my job a bit, but still not as much as people working (or currently not working) in production. We just raise prices too, but we needed to send people home in the meantime.

Don't know how much the chip scarcity is related to Covid or if it is just useless coin miners.

edit: Not located in the US though.

A friend of mine had his company grow and basically was able to increase his profit by the entire $1,700,000.00 his company received.

Maybe we shouldn't have had mandatory lockdowns to start with? Free choice and small government sounds nice right about now to me.

The government can't even give our money away with a basic level of competence? This is worrisome.

> The government can't even give our money away with a basic level of competence?

Lots of people in the executive wing and their friends/cronies benefited: it was competence, but in the way one would hope. A member of cabinet resisted[1] releasing names of companies that benefited from PPE loans to congress, calling it "proprietary information" - that was not an accident or bumbling.

1. https://www.usatoday.com/story/money/2020/06/13/mnuchin-ppp-...

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