Tags: Coronavirus | joseph stiglitz | stimulus | programs | failed | workers

Joseph Stiglitz: Govt Stimulus Programs Have Failed US Workers

By    |   Tuesday, 02 June 2020 03:44 PM

Nobel Prize-winning economist Joseph Stiglitz said stimulus from the federal government isn’t providing relief for the most vulnerable workers and companies.

The Small Business Administration's $660 billion Paycheck Protection Program (PPP) was “particularly badly designed,” the professor at Columbia University told CNBC.

“The problem wasn’t just the amount of money. It was how the programs were designed,” Stiglitz said. “Our programs have failed, and we have to admit that,” he said.

“The businesses with the best connections with the banks, the best customers, got at the head of the line, and those weren’t the smallest businesses, they weren’t the people who needed it most,” he said.

With more than 40 million Americans out of work, Stiglitz warned that the economic recovery “is not going to be easy” even after the virus has been put under control.

“We just haven’t thought enough about how we get money to the businesses in ways that make sure they really keep the attachment to the workers with those businesses,” he said.

Stiglitz said lawmakers should prioritize policies that assist younger workers. Otherwise, he said, the U.S. risks facing a “lost generation” of workers.

“Every young person should be either in school, on a job or in training in some way,” Stiglitz said. “These are valuable years, you shouldn’t be wasting those years feeling disconnected, resentful. So I would put a really high priority on that kind of program.”

Meanwhile, nearly a dozen people with knowledge of the matter told Reuters that a technical snafu in a U.S. government system caused many small businesses to receive loans twice or more under a federal aid program to help businesses hurt by the COVID-19 pandemic.

The money mistakenly handed out could amount to hundreds of millions of dollars that the government and lenders - which made the loans - have been trying to identify and recover in recent weeks, one of the people briefed on the matter said.

The technical issue and scale of the resulting duplicate deposits made under PPP have not been previously reported. They are the latest issue to emerge with the massive program, which was designed to keep businesses hurt by the novel coronavirus afloat and their workers employed.

The error was caused by a blind spot in the SBA's loan processing system which failed to see when some borrowers submitted applications multiple times typically with several different lenders, three of the sources said.

Information provided by the sources, which include industry executives and borrowers, as well as Reddit posts, suggest at least 1,020 duplicate deposits were issued. While that is a tiny fraction of funds disbursed under the huge program, it could amount to roughly $116 million dollars based on average loan sizes.

A spokesman for the SBA declined to comment, while a spokesman for the Treasury, which jointly administers the program, did not respond to a request for comment.

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Nobel Prize-winning economist Joseph Stiglitz said stimulus from the federal government isn't providing relief for the most vulnerable workers and companies.
joseph stiglitz, stimulus, programs, failed, workers
Tuesday, 02 June 2020 03:44 PM
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