Rocky Start
The Paycheck Protection Program -- created to hand out $349 billion to small companies through loans that convert to grants if a company retains or rehires its workers -- got off to a rocky start. The White House said April 9 that $128 billion of loans had been processed. But very little, if any, of that money had actually been disbursed.

The Federal Reserve is preparing a separate program, the Main Street lending facility, that will make $600 billion in loans available to small and mid-sized companies. But even as officials revealed details of the scheme on April 9, they couldn’t give any timetable for when it might open.

Fed Vice Chairman Randal Quarles said Friday that getting the loans to mid-sized U.S. businesses through the Main Street lending program is two-to-three weeks away.

Juice Company
“There’s going to have to be a certain tolerance of imperfection” in getting aid programs running, said David Wilcox, a senior fellow at the Peterson Institute for International Economics. “They cannot afford to be cavalier or haphazard, but they do need to recognize the urgency of the situation because economic dreams are being shattered on an daily basis.”

Shizu Okusa and her employees at the Washington D.C.-based bottled juice company Jrink could be an example. Okusa has closed her brick-and-mortar outlets and laid off 30 of her 38-member staff as revenue collapsed by 80%.

On April 3 she applied for a $170,000 PPP loan that will let her rehire her staff and pay rent and other bills. Her bank, EagleBank, said they might be able to approve the application and release funds this week. But maybe not. Okusa is already exploring options -- including the possibility of a merger or sale.

“It’s like you’re about to board a plane, and you’re all hovering around the entrance waiting to board, but they’re not letting you in,” Okusa said.

Every business failure represents a miniature blow that rolls forward.

Suppliers and vendors lose future revenue and laid-off workers cut back on spending, further reducing demand across the economy. That can create what Columbia University’s Glenn Hubbard, a former chief economist to President George W. Bush, has called a “demand doom loop.” Without large rapid government intervention, it could trigger a Depression-like downturn, he said.

States, Cities
Past the fire wagon stage, Congress will have another chance to heavily influence the pace of the eventual recovery by bailing out cities and states, which are headed for major budget shortfalls as tax revenues plummet and corona-related spending rises. Without help they could be forced to make draconian cuts to spending and jobs.

That’s what happened after the recession of 2007-09, contributing to the tepid recovery.

“The State and local government component is going to be critical because so many states have balanced budget amendments,” said Seth Carpenter, chief U.S. economist at UBS Securities LLC and a former Treasury official. “Any way to prevent contractionary fiscal policy, whether federal or state or local, is going to help differentiate the recovery after this recession from the last one.”