USS Economy hits a rock and here's how it turns out
Best as I can tell, talking to frustrated small business owners who lived it, here is how the Payroll Protection bailout worked:
Imagine the US economy is a giant boat, like the Titanic. We’ll call the ship the “USS Economy.”
All the passengers are business owners – small businesses, mid-sized businesses, large private companies, large public companies, large VC-funded start ups, etc.
As they come aboard, you notice a difference between the passengers:
Many of large private companies, large public companies, large VC-funded start ups, even some of the mid-sized companies are wearing life vests. These life vests represent resources and business stability: they have financial backers who can provide resources in a crisis, they have enough cash on hand in the event of a crisis, they have investors or stockholders who have put money in to enable to the company to withstand a downturn, they are in industries and markets that won’t be disrupted to the point where the business will need to lay off people or possibly go under. ALL of them have life vests already.
Some businesses with investors or backers or good businesses don’t have life vests, because instead of investing in life vests they wasted their money on debt or foolish acquisitions or other poor business decisions.
Finally there are the small business owners and some mid-sized business owners – they live as close to the bone as possible, just to stay afloat. They have employees and resources, but if there is a crisis, they will experience serious hardships and layoffs. They do not have the resources to own live vests.
So the USS Economy leaves port, and is steaming along in beautiful, deep, warm spring waters when it hits some sort of obstruction – hard rocks created by cooled lava, produced by a volcanic eruption, perhaps, that has unexpectedly risen from the ocean floor. Volcanic lava flows don’t have names, but this one does: COVID-19. And, suddenly, the USS Economy is sinking out in the middle of the ocean.
The passengers all rally around each other! Lives are literally on the line, but we are going to get through this together! It’s time to look out for each other and pull together as a team, and let’s beat this thing! We will survive together!!
The captain announces that, as the USS Economy is the greatest ship in the world, it is equipped with enough lifeboats for any passengers who need it. HURRAH!
The captain picks the pursers to get the passengers into the lifeboats. (In this analogy, pursers are banks. But you probably already realized that.)
IMMEDIATELY all the passengers rush towards the lifeboats, and the pursers are overwhelmed. So, to create order, the pursers organize the business owners into three lines: business owners who can afford life vests, business owners who squandered their resources on something other than life vests, and small business owners who could not afford a life vest. The last line is by far the longest.
The small business owners look over at the other two lines. “What are you doing?” they yell at the first line. “You don’t need a lifeboat! You have a life vest!”
The life-vest-wearing business owners ignore the protests, talking amongst themselves and distracting the pursers from the complaints by complimenting the pursers on their spiffy outfits, which were purchased by the life-vest-wearing business owners. “We need the seat on the life boat,” they say. “Yes, the life vests are nice, but we don’t want to get wet. Give us the seats, not the small business owners who will drown.” It doesn’t take much to get the pursers to agree and ignore the small business owners.
The small business owners look at the second line. “Hey! You should have life vests but you wasted that money while we scrimped and saved and employed the majority of people in the country! Why should you get a seat in a lifeboat?”
The profligate business owners ignore the shouting, admiring each other’s gold jewelry and giving some to the pursers, who take the gifts gratefully. “Listen, this is awkward,” these business owners say. “Yes, we should have bought life vests instead of all this heavy jewelry. But we’ve also given you plenty of jewelry, am I right? I know me getting a seat means small businesses will drown, but… help a brother out.” The pursers agree, ignoring the small business owners’ concerns.
The pursers begin putting passengers in the boat. “Three of you [pointing at the first line], two of you [pointing at the second line], and one of you [pointing to the small business owners].”
The small business owners cry out: “We need to get on the lifeboats! I thought we were all in this together! We were going to beat this thing as a team! WE WILL NOT SURVIVE if the lifeboat seats are taken up by business owners who already have life vests and do not need to be in the lifeboats!!!”
Half the ship is under the surface now. The business owners wearing life vests watch dispassionately as small business owners begin screaming, sinking into the depths, drowning. They turn back to the pursers to tell them their seat preferences. The pursers continue filling the lifeboats, mostly with companies that already have life vests or should have bought life vests. Sharks are now devouring the screaming small business owners flailing in the water.
The captain comes over the loudspeaker: “The lifeboat distribution process is working GREAT!”
The bulk of the USS Economy is submerged now. As the lifeboats filled with large business owners wearing life vests (and some small business owners who managed to get a seat) row away from the sinking ship, the increasingly distant wail of small businesses, dying in the water, is horrible. A few of the large business owners feel embarrassed. Some take off their life vests: “Here, we’ll give this back!” they yell, and throw the life vests toward the far-off sinking ship. The life vests fly a few feet and fall in the water, far short of the drowning small businesses and useless.
The honorable USS Economy passengers in lifeboats eventually reach safety and tell a tale of heroism and sacrifice.
And so it goes.