Howard Schultz argues that coronavirus stimulus for small businesses should pack a much bigger punch, warning that wealth inequality will be much greater after the coronavirus crisis if small businesses don’t survive.
The Trump administration and Congress are closing in on a $450 billion deal to provide the much-maligned small business stimulus program with a new infusion of cash, in addition to aid to hospitals. On Sunday, Treasury Secretary Steven Mnuchin told CNN that the new tranche of small business funding would be around $300 billion figure, and “should be efficient to reach almost everybody.”
Yet in a recent interview, Starbucks (SBUX) ex-CEO made a forceful argument for why aid for the hard-hit sector needs to “have a T in front of it. This [should be] a trillion-dollar number in order to save these businesses,” he told Yahoo Finance.
Congress is scrambling to approve a fresh round of small business stimulus after the widely criticized Paycheck Protection Program ran out of money last week. Since then, the Small Business Administration has been unable to dole out emergency loans to cash-strapped applicants, as part of the $2 trillion stimulus proposed by the CARES Act to stave off the pandemic’s worst effects.
Meanwhile, Schultz added his voice to critics of the small business lending package. “I think the government tried to do their best, but it was rushed. It’s not perfect,” he said.
“But yes, the way this thing has been structured, it is basically a big business coauthored program. Small businesses have been left behind,” he added.
‘Dramatic negative effect’
Schultz explained that the previously booming economy and markets had been “camouflaged by the record number of profits and cash on the balance sheets of corporations, which even as we sit today is greater than it was post-9/11.”
The billionaire added that the COVID-19 crisis is going to make inequality “so dramatic and so acute — much, much greater than it has been in the last 10 years — as a result of a post-corona life in America.”
He emphasized that it’s “vitally important” for banks, corporations, and government officials to understand that the issue goes beyond helping businesses remain open.
“We’re also trying to maintain a level of employment for millions of people. And if millions of people are unemployed for a period of six months to a year, it is going to have a dramatic negative effect on the social fabric of the country,” he added.
In a matter of four weeks, 22 million Americans filed for unemployment insurance, as nationwide lockdowns shuttered businesses and mostly locked residents indoors. Many of those displaced are drawn from the nearly 30.7 million small businesses in the U.S., employing around 47.3% of the private workforce, according to the U.S. Small Business Administration.
“So the rippling effect of not saving these small businesses is much, much greater than the economic issue alone, which is, unto itself, paramount to the country. The social fabric issues are even greater than what could happen if these businesses don’t survive,” Schultz said.
In his hometown of Seattle, the Schultz Family Foundation launched The Plate Fund, delivering one-time cash payments of $500 to impacted Seattle and King County restaurant workers, including those who are undocumented, within 48-hours, well-ahead of the federal response.
Julia La Roche is a Correspondent at Yahoo Finance. Follow her on Twitter.