The Trump administration now finds itself positioned similarly to the early years of the Reagan presidency, devoting its full attention and resources to returning the economy to normalcy amid skyrocketing unemployment and a growing sense of despair permeating American society.
In 1981, a national oil crisis worsened by contractionary monetary policy drove the economy into a crisis-turned recession. While we passed sweeping tax relief and other programs to help spur economic growth, President Reagan also recognized that allowing corporate behemoths and others to abuse the system would undermine his plan for a robust recovery. To that end, he started the President’s Council on Integrity and Efficiency that was ultimately responsible for $1.3 billion worth of recoveries and restitutions, the prosecution of over 4,000 cases of fraud and over 2,400 problem entities receiving suspensions from doing business with the government, if not stopped completely.
Faced with a different catalyst for a crisis, President Trump has focused on short term liquidity to stem the economic bleeding caused by government-mandated shutdowns. But much like Reagan, Trump will have to fight the 2020 version of abuses that could threaten his own recovery plans.
Entities ranging from million-dollar companies to Ivy League schools have ignored the stipulations that Paycheck Protection Program (PPP) loans be “necessary to support the ongoing operations” and lined up to consume large chunks of the initial $349 billion allocated for small business loans.
But outright theft is just one form of abuse the White House currently faces. Demonstrating some of the worst forms of abuse, trial lawyers are also making plans to sue everyone from small businesses to hospitals and even homeowners over a virus they can’t control. These plaintiff firms are not only targeting health care providers but also employers that reopen and become faced with a sick worker or customer.
In a new twist, the trial bar is even teaming up with millionaire celebrity chefs to demand payouts for bogus insurance claims – a new revenue stream for corporate interests that will drain resources for small businesses in need.
Worth over $200 million between them, Wolfgang Puck and Thomas Keller are demanding that the government force property and casualty insurers to pay business interruption claims for policies they don’t hold and never purchased. They have formed a coalition with a prominent trial lawyer and are loudly threatening massive legal action if the government doesn’t bend to their will. Of course, if the government does, it will drive many companies into insolvency, leaving millions of American businesses unprotected.
At the same time that these millionaires continue to push fraudulent claims through the trial bar, many of their ilk are lining up to get their piece of the billions of dollars in the PPP program. It is preposterous that these chefs, who built their businesses on the backs of marginal income workers, would try to take relief money away from small businesses in need. Many of their employees receive such low wages that they actually would prefer to stay on unemployment than remain on the payroll. And yet, this is the reality that the U.S. Small Business Administration and Treasury Department now face.
The fraud, abuse and massive cash-grabs currently on display haven’t gone unnoticed by the administration. Treasury Secretary Steve Mnuchin previewed a crackdown on abuse in an April 22 CNBC interview saying that there will be “severe consequences” for those who commit fraud. To that end, the White House has already created the Pandemic Response Committee, comprised of two dozen federal inspectors general, to help root out this fraud, and recently named acclaimed IG Robert Westbrooks to the team. Economic Advisor Larry Kudlow has also pointed out the need for overall liability protections from the administration and Congress, saying, “Businesses, particularly small businesses…should not be held to trial lawyers putting on false lawsuits that will probably be thrown out of court.”
These initiatives are a good start but should only mark the beginning. In comparison to 1981, the coronavirus will have a much longer and complex trail of consequences. Winning this fight will take not only defeating the virus but also those who seek to unjustly profit from it. It is imperative that the administration takes continual and direct action to reign in the bad actors and ensure that help arrives where it is most needed, just as Reagan did so long ago.
Bay Buchanan served as the 37th Treasurer of the United States under President Ronald Reagan