SACHA PFEIFFER, HOST:
Remember the Paycheck Protection Program? It gave potentially forgivable loans to small businesses to keep workers employed during the COVID shutdowns. It was easy to get the loans and easy to get them forgiven. But a lot of that money was lost to fraud or went to companies that thrived during the pandemic. That's partly because the government prioritized speed over accuracy and put in place very few safeguards. Here's MIT economist David Autor.
DAVID AUTOR: There was just no targeting. There was no ability to send the money just to the firms that need it. It's as if you came home from work one day, and you walked into your kitchen and, you notice, oh, my God, there's a small fire by the stove. I need to put this out. But you don't have a fire extinguisher. So you go outside, you connect a huge hose to a fire hydrant, and you come in and you doused your entire house with water. Well, that would certainly put out the fire, but it would be a very costly thing to do.
PFEIFFER: Autor co-authored a study on this. It's called "The $800 Billion Paycheck Protection Program: Where Did The Money Go And Why Did It Go There?" And the conclusion?
AUTOR: Most of that money did not go to workers who otherwise would have lost jobs. In fact, we estimate somewhere between, you know, $1 in $3, and $1 in $4 went to that purpose. And the other $2 out of $3, or the other $3 out of $4 ultimately went to business owners, their creditors, their suppliers, all of whom are disproportionately pretty affluent. So about three-quarters of all the PPP money, some two-thirds to three-quarters, ended up in the top 20% of all U.S. households.
PFEIFFER: But Autor says there's another deeper problem with the program. He also blames outdated government technology. He jokes that while conspiracy theorists worry about the deep state, we should actually be concerned about the shallow state.
AUTOR: Which is a lack of administrative capacity to handle real time, really complicated problems involving a ton of money.
PFEIFFER: He says many other Western countries did a far better job of distributing their pandemic relief money. And for this week's episode of All Tech Considered, I asked him to explain why.
AUTOR: Many European countries, and also Canada, have something that's called short-time work. Short-time work is when a company is facing economic hardship, it may reduce headcount, typically by reducing the number of hours that workers are employed. And then the government will pay back some of those hours by reimbursing the firm or reimbursing the worker directly. That requires the government has a pretty good real-time view - it doesn't have to be, you know, hour-to-hour - of the payroll of many firms. And there was no incentive for firms to claim hours that were being reduced that were not, because the government could actually see them.
PFEIFFER: Can European countries do that because their government technologies are more modern and sophisticated?
AUTOR: Absolutely. Most countries, you don't actually file taxes at the end of the year. The government sends you a tax bill. It's not necessary to do all the data collection that American households do because that information is already centralized.
PFEIFFER: The government's already collecting the data.
AUTOR: Exactly. But let me make a point, because I think many people hearing this and go, oh, my God, you know, we don't want an intrusive government doing X, Y, and Z, seeing all these things that households do, and I think it makes many people uncomfortable to hear that. However, these data are already being collected by the federal government, just not in a timely way. So every state has an unemployment insurance system, all 50 of them. And they all get from employers, every quarter, the number - the workers, their names, how much they pay them, etc. And then all those data are reported to the federal government, but it happens at a snail's pace. And all of those state UI systems are 50, 60, 70 years old, running COBOL, a programming language that was last in heavy use during the Y2K crisis, when programmers had to come out of retirement to fix systems that were old and outdated 20 years ago.
PFEIFFER: So some fault to the government, some fault to technology. Have our government technological systems always been outdated? And this is a chronic problem?
AUTOR: No, not at all. The United States led the world in administrative systems. We were the first country to use computers to do data collection. So the 1890 U.S. Census of populations was read by a punch card machine. It was the predecessor to IBM. That was the beginning of the information technology revolution. We led the world in setting up surveys like the current population system. We led the world in having a centralized tax authority. The U.S. was way ahead of the curve in terms of the efficiency, the quality, the reliability of administrative systems. And all of that began to ebb and ultimately decay in the 1980s, when we decided government was not the solution, government was the problem, and began to underinvest in these systems that we had built. So in many ways, we're running on the fumes of investments that were made decades earlier.
PFEIFFER: It sounds like you're almost saying it's self-fulfilling incompetence, meaning we starve our government agencies and then they don't perform well, and we think they're incompetent, and it's this vicious cycle.
AUTOR: I fully agree. If you go into a post office (laughter) in America, you just think, oh my God, what has gone wrong here? The signs are 20 years out of date. The people - you know, they're understaffed. It's not working well. The truth is the U.S. has an amazing postal system. We still have some of the lowest rates and the most efficient mail distribution. But the postal system doesn't have the ability to raise the revenue to pay for modern staffing, modern conveniences, and so it appears to be archaic. And eventually, people say the government can't do anything right, post office can't even run itself, but, of course, that's a choice by Congress.
PFEIFFER: If there is another economic crisis in the U.S. that results in more government financial intervention, how should we do it better next time? Or are we currently not equipped to do it better next time?
AUTOR: We are not equipped. We could be equipped. And such a time certainly will come, there will be other crises. There always are. I would say the most natural place to start is with the unemployment insurance system, to have an ability to see what firms are paying workers in real time. And if we were to build a modern, centralized unemployment insurance system, the government would still be collecting the data, would still have a big role in making the payments, but then when the next crisis occurred, we wouldn't just have to write blanket checks to many, many businesses. We could just say, well, let's look at your payroll. How many workers - you know, how much did you reduce hours, how much did you reduce headcount? That's what we're going to compensate those workers for.
PFEIFFER: If some of our government technological systems are five to seven decades old, as you said, they don't just need a small upgrade, they need a massive overhaul. So how optimistic are you that these systems are really going to improve much any time soon?
AUTOR: My pessimism about that is only a function of the decisionmakers, not the feasibility. You can buy computing capacity from Amazon or from Microsoft or from Google. You don't even have to buy the hardware anymore. And the government contracts on this scale all the time. It does it through the military. But we don't spend that on our social infrastructure, and we pay a price for that.
PFEIFFER: David Autor is a professor of economics at MIT. David, thank you.
AUTOR: Thank you very much. Transcript provided by NPR, Copyright NPR.
