Toomey Opening Statement at Banking Hearing on COVID and Small Businesses
Washington, D.C. – In this morning’s U.S. Senate Banking Committee, Ranking Member Toomey said the Democrat stimulus package, with its $15-an-hour minimum wage and massive increase in unemployment benefits, would do more harm than good for the economy. Further, another government-run credit program would needlessly duplicate other COVID-relief efforts like the Paycheck Protection Program and crowd out private credit and capital.
Ranking Member Toomey’s opening remarks, as prepared for delivery:
“Thank you Chairman Brown, and thank you to our witnesses for testifying today.
“COVID has been an unprecedented crisis, and Congress has responded in extraordinary way. Congress has passed five bills in response to the pandemic. It provided almost $4 trillion in relief. The most recent $900 billion bill was signed into law less than 2 months ago. All five of these bills received overwhelming bipartisan support. To date, Congress has acted in unified manner to pass legislation—as needed—to prevent the economy from spiraling into depression and to facilitate our current economic recovery.
“And let’s be clear: the economy is in recovery mode. The unemployment rate has dropped from almost 15 percent in April 2020 to 6.3 percent this January. As of December, 18 states had unemployment rates below 5 percent. We’ve seen GDP growth the last 2 quarters. And CBO’s latest estimate is 4.6 percent annual real GDP growth rate for 2021.
“Unfortunately, President Biden and Democrats are pushing a $1.9 trillion bill that is completely partisan and divorced from economic reality. This bill is not designed to find common ground. Unlike previous bills, it’s not an economic relief bill, as its size and contents are not dictated by any rational economic justification. Overall, it’s wasteful, poorly targeted, and largely unrelated to COVID.
“For example, the Democrat plan for small business aid would spend billions when billions have already been spent and are available.
“The Democrat plan includes $15 billion for Economic Injury Disaster Loans (EIDL), known as EIDL, $10 billion to restart the Obama-era State Small Business Credit Initiative, known as SSBCI, and $7.5 billion for the Paycheck Protection Program, known as PPP.
“But Congress has already provided over $1 trillion in relief to small businesses. Just two months ago, Congress gave $284 billion for the hardest-hit businesses to apply for second-draw PPP loans, $20 billion for EIDL loans, and, $12 billion for Minority Depository Institutions (MDIs) and Community Development Financial Institutions (CDFIs) to invest in low- and moderate-income communities.
“MDIs and CDFIs won’t even be able to push out these funds quickly. The $12 billion is 50 TIMES the annual amount of the CDFI Fund.
“Billions of these dollars are still available. As of February 21, 2021, more than $140 billion in PPP remained untapped. As of February 24, 2021, none of the $20 billion for EIDL has been disbursed. It’s doubtful that much, if any, of the $12 billion for MDIs and CDFIs has been put to use.
“There’s currently no need for $10 billion to restart a program — SSBCI — that was tried and failed. When SSBCI was operational in the early 2010s, the results were extremely disappointing. As is the case with most government programs, the SSBCI was slow to launch and inefficient at deploying capital. Loans and investments often took months or years to reach small businesses, casting significant doubt on why reauthorizing this program makes sense at this time.
“Based on this experience, we know that the SSBCI will not get money to small businesses that may need it now.
“The program was also riddled with problems. Audits by Treasury’s Inspector General and the GAO point to a program that was wasteful, inefficient, and poorly managed. And CRS has noted that it’s unclear whether the program had any impact on overall small business lending.
“More fundamentally, this program is objectionable on its face. Unlike PPP, it’s not about providing COVID relief since it makes funding available for years after the expected duration of the pandemic. In fact, CBO estimates that only eight percent of the $10 billion for SSBCI will be spent in 2021. And unlike PPP, it’s not about keeping employees on payroll, since it contains no such requirement. This program is just a means for the government to hand out money and decide who gets credit or capital.
“In addition to misusing taxpayer resources for things like SSBCI, the Democrat plan is rife with provisions that will harm small businesses, workers, and the economic recovery that’s already underway.
“For example, the bill would raise the federal minimum wage to $15 per hour. Such an increase would harm small businesses and low-income workers – especially in hard-hit industries. CBO projects a loss of 1.4 million jobs - potentially as high as 3.7 million.
“Today, two of our witnesses will tell us more about the damage that a $15 minimum wage will do. Joel Griffith will discuss the overall economic impact of such a distortionary policy. And Dani Ritchie, from my home state of Pennsylvania, will discuss the harm it would do to workers and small businesses based on her personal lived experience.
“In many cases, the Democrat bill isn’t event targeted to provide temporary aid during the pandemic.
“According to CBO’s estimates, only a fraction of $1.9 trillion will be spent during 2021. That means billions of dollars in this bill are designed to be spent years down the road when the economy has recovered.
“Among the spending items under the Banking Committee’s jurisdiction, CBO estimates that, in 2021, only about 50 percent – $9.5 billion - of $19 billion for rental assistance will be spent. Only eight percent - $825 million - of the $10 billion for SSBCI will be spent. Only five percent - $250 million - of $5 billion for emergency housing vouchers will be spent.
“And this one is just incredible: zero percent of the $5 billion for homeless assistance programs will be spent.
“And then there are provisions in the Democrat plan that are so unrelated to COVID, it’s hard to read them with a straight face. $86 billion to bail out multi-employer pensions without requiring any reform. $100 million earmark to build a subway in Silicon Valley which will take years to spend. $135 million for the National Endowment for the Arts. $135 million for the National Endowment for the Humanities. $91 million for “outreach” to student loan borrowers. $50 million for environmental justice grants.
“Small businesses and their workers don’t need a $1.9 trillion bill that is wasteful, poorly targeted, and largely unrelated to COVID. And they certainly don’t need harmful policies like a $15 minimum wage hike.
“Rather than trying to ram through a partisan, bloated and unnecessary spending bill, Democrats should focus on lifting government shutdown orders and restrictions, reopening our schools, and distributing vaccines so that small businesses and their workers can thrive again.”
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