Marco Rubio has not let the coronavirus crisis go to waste.
Landmark legislation usually doesn’t emerge out of the Senate Small Business and Entrepreneurship Committee, but the Florida Republican used his chairmanship to create the Paycheck Protection Program, the most innovative policy included in the roughly $2 trillion economic rescue package enacted in March.
Through social media posts and TV appearances, especially on the business-focused CNBC cable channel, Rubio is becoming the face of the PPP, linking his political fate to a massive, untested economic experiment so popular it burned through $349 billion in less than two weeks.
With Congress set to add another $310 billion to the PPP’s coffers this week, Rubio is leveraging his time in the limelight to promote a worker-centric economic philosophy steeped in Catholic social thinking that runs counter to decades of Republican free-market dogma.
The recent celebrity comes with risks for the once — and perhaps future — presidential candidate. The jury’s still out on the PPP. As much as Rubio claims the PPP’s successes, he’ll have to own its failures, too.
“This PPP is a huge deviation from traditional, limited-government Republican policy,” said Alex Conant, a partner at Firehouse Strategies and communications director for Rubio’s 2016 presidential campaign. “Obviously, there is nothing usual about the times we’re living through right now, and it seems like government has to do something, but it’s just a really interesting way to do it.”
The PPP allows small businesses to get forgivable loans through the Small Business Administration to keep paying employees while COVID-19 countermeasures shutter much of the economy. The $349 billion appropriated by Congress in the March economic rescue measure lasted just 13 days as more than 1.7 million small businesses rushed to get the quasi-grants. A survey by the National Federation of Independent Businesses estimated that 74 percent of the nation’s 6 million small businesses applied for the PPP loans, but just 20 percent had received disbursements before the funding ran out.
The Senate on Tuesday voted to increase the program’s budget to $659 billion, and the House appears set to follow suit Thursday.
That the SBA is front and center to economic recovery — or at least preventing further collapse — would seem unlikely going into 2020.
The George W. Bush administration dropped the SBA from the Cabinet, and some Republicans advocated eliminating it. Even Barack Obama, during the transition, questioned its use, said Karen Mills, his first SBA chief.
“He said, “Should we get rid of this?” Mills recalled. “I said it’s a ruby in the rough — when you look under the hood, it has unbelievable assets.”
Instead of axing the SBA, Obama restored it to a Cabinet-level agency.
Now the SBA is on the front lines of countering the largest and fastest economic collapse since the Great Depression, thanks to Rubio arming it with the PPP, Conant said.
“This was the one big bipartisan program that was included in the last round of stimulus, and it’s because of his leadership,” he said. “It’s a very low-profile committee that isn’t known for major legislation. So I think it makes it even more impressive that he was able to do it.”
Tony Fratto, a partner at Hamilton Place Strategists and former deputy press secretary and assistant Treasury secretary under Bush, said he was amazed other politicians with credible PPP authorship claims haven’t stepped up the way Rubio has, especially given how rarely the Senate Small Business Committee makes news.
“I don’t know who the ranking member is. I don’t know who the chair and ranking member of the Small Business Committee on the House side are,” he said.
That Senate ranking member, Benjamin L. Cardin of Maryland, and House chairwoman, Nydia M. Velázquez of New York., did not respond to a request for comment. House ranking member Steve Chabot, R-Ohio, said his role was limited on a bill that originated in the Senate and gave credit to Rubio for “leading the charge” on the PPP.
Sen. Susan Collins, R-Maine, who co-wrote the draft bill that became the PPP provisions of the March bill, also did not comment, but the Republican National Committee has been touting her efforts in news releases aimed at her tough reelection this fall, which Inside Elections with Nathan L. Gonzales rates a Toss-up.
From medical gear to saving jobs
Rubio said he started working on a small-business bill in early February with Cardin. The initial idea considered whether small businesses could help ramp up production of needed medical gear, but Rubio said it became clear the problem was going to be bigger.
“When we saw how this was escalating, we realized that there are going to be a lot of job losses,” he told CQ Roll Call last week. The focus shifted to how “to keep small business from having to let go of their employees.”
Since the bill passed, Rubio’s full-court media press and frequent Twitter updates have kept him in the spotlight even as social distancing and a prolonged recess have left most lawmakers looking on while leadership negotiated an interim spending deal.
“If I was working for Marco Rubio, he’s doing exactly what I’d hope and recommend that he does,” said Fratto. “I don’t understand why the others aren’t stepping up on this too.”
The reason, said one Republic strategist who requested anonymity to speak frankly, is that Rubio is wielding a double-edged sword by hewing so closely to the PPP.
“The whole actual implementation of the program has been inconsistent at best, which becomes a potential issue if he’s going to be touting it,” the strategist said. “If it’s not implemented well, it could end up being a bit of liability.”
In addition to the program’s tumultuous debut and quick depletion, Securities and Exchange Commission reports revealed that publicly traded, high-end restaurant chains received loans up to the $10 million limit — and some, like Ruth’s Chris and Fogo de Chão, even more, relying on their corporate structure to apply twice to the PPP.
Meanwhile, millions of truly small businesses, like Beth Goldstein-Huxen’s Brazilian jiu jitsu dojo, Osagame, in Philadelphia, have been frozen out. Goldstein-Huxen’s bank told her the PPP funds ran out before they could authorize her $17,000 loan request.
“It’s incredibly frustrating. I’m trying to juggle a million things and trying to put together the paperwork that large companies already have systems for,” said Goldstein-Huxen, who was later told her application was missing documentation.
Rubio, who pressed to loosen the SBA’s affiliation rules to allow some restaurant and hotel chains to participate in the PPP, said Monday he would use his committee’s subpoena power to make sure only businesses actually harmed by the coronavirus were using the program.
Over Rubio’s protests, congressional leadership delayed refilling the PPP purse for a week — a wait that may be costly for some companies. According to a JP Morgan Chase Institute study in 2019, only half of small businesses had enough cash to last two weeks without revenue. Nonessential businesses started closing in mid-March, about seven weeks ago.
Administratively, the hard part hasn’t even begun. The SBA back-loaded most PPP paperwork requirements for loan forgiveness. A barrage of bureaucratic snafus, and the subsequent business closures they cause, could replace all of the hope and the hype the PPP now gets.
Picking winners and losers
The GOP operative also said Rubio could face a backlash for getting the government so directly intertwined with the private sector.
“His willingness to pick winners and losers inside the economy — I think — is very politically risky, but is also a big shift away from traditional conservative economic orthodoxy,” the strategist added.
If the PPP fails to save small businesses, or turns out to be an expensive boondoggle, it could kneecap Rubio’s effort to promote a competing concept for conservative economics to the Reaganite policies that defined the GOP up until Trump’s election.
Since losing the 2016 GOP presidential primary, Rubio has rethought some past policy positions. After saying on the stump that America needs more welders and less philosophers, Rubio now waxes philosophical himself, developing a theory of “common-good capitalism.”
He now wants that populist, worker-centric thinking to inform the fiscal stimulus he hopes Congress will pass this summer, after the worst of the pandemic is over.
“I think part of our recovery needs to be not simply, ‘How do we get back to where we were on March 1, on March 15?’” Rubio told CQ Roll Call, “but, ‘What should our economy look like in the 21st century?’”
In answering that, Rubio often sounds more like progressive Sen. Sherrod Brown, D-Ohio, than a child of the Reagan revolution, talking about the “dignity of hard work” and lamenting Wall Street’s influence over the broader economy. “Large corporations have become vehicles for shareholders and banks to assert claims to cash flows, rather than engines of productive innovation,” he wrote in National Review in November.
Last May, Rubio published a policy paper attacking shareholder primacy — the theory that says corporations should maximize stockholders’ profits over all else for the sake of economic efficiency, which ultimately benefits everyone. It’s been a closely held tenet of the corporate world and the GOP since the 1970s.
The left-wing magazine American Prospect described Rubio's 42-page paper as “chockfull of arguments that Prospect readers and others who’ve followed the work of progressive scholars would find very familiar.”
Rubio expressed this new worldview in a series of policy proposals: discouraging stock buybacks by taxing them on par with dividends; offering tax incentives to businesses that invest in the U.S.; and replacing America’s adversarial labor relations system with a more collaborative model like Germany’s, to name a few. Until the PPP, none garnered more than academic attention.
Conservatism to GOP populism
Rubio’s essays and speeches on his idea of common-good capitalism draw heavily from his Catholicism, quoting papal encyclicals that hold man’s labor above capital, and from the work of economists such as Oren Cass, who recently left the conservative Manhattan Institute to start a new think tank, American Compass.
Cass called the PPP one of the first major legislative wins for Republican populist principles.
“One of the most important things about PPP is that it represents a widening of the lens for economic policy,” he said.
“Traditionally, the GOP has vacillated between ‘Thou shalt not get involved’ and ‘Well, obviously, we need another tax cut,’” Cass said. “PPP illustrates how a conservative applying principles to real economic problems can generate solutions beyond those defaults.”
Rubio has also abandoned his past support for free trade and more immigration, a change that concerns some conservatives who applaud his work on the PPP.
“We’re having a richer debate on how to deal with the problem of when demand for whatever reason falls off … and Rubio is absolutely a part of that. He helps Republicans be a better participant in that debate right now than they ever were before,” said Fratto. “Where I get worried about where Rubio could be going — and thinking about where the Republican Party is going — is this anti-elite, anti-globalist, nationalist kind of view that has led them to be anti-trade, xenophobic, anti-immigration, anti-American participation in leadership in world affairs.”
Rubio’s not the only young, ambitious populist in the GOP trying to make a name for himself.
Missouri Sen. Josh Hawley proposed a broader version of the PPP that would pay companies of all sizes affected by COVID-19 to keep their employees on the books up to 80 percent of payroll up to national median wages until the pandemic ends, more akin to what’s being done now in Denmark and echoing a proposal from Sen. Bernie Sanders, a Vermont independent who counts himself a democratic socialist.
And while Arkansas GOP Sen. Tom Cotton has adopted a more populist tone on some economic issues, it has mainly manifested itself as deep mistrust of China and global trade. That led to positive press when his earlier criticism of China’s handling of the COVID-19 outbreak proved prescient.
All three are young — Rubio, at 48, is the oldest — and have been mentioned as potential presidential candidates in 2024.
And, of course, Trump himself has promoted right-wing populism from the Oval Office. But even as he launched a tariff war with U.S. trading partners and implemented the harshest anti-immigrant policies seen in decades, Trump’s domestic economic policies have done little directly for blue-collar workers.
The signature achievement of Congress before the 2018 midterm elections was a tax overhaul package that had as its centerpiece a dramatic cut in the top corporate rate. But Rubio was one of the last Republican holdouts in the Senate on the bill and only offered his support after securing an increase and expansion of the family tax credit.
Still, most of the breaks aimed at corporations ended up boosting the bottom lines of shareholders, not blue-collar employees. Companies in the S&P 500 spent $806 billion in buybacks in 2018 and real average hourly earnings only rose 1.7 percent that year.
Rubio has since criticized the tax cuts for not doing enough to incentivize investment. The failure of his actions to match his rhetoric has drawn critics, particularly on the left, who see his attempts to find a path between unfettered capitalism and socialism as little more than an empty exercise in branding.
Rubio told CQ Roll Call that his focus is on convincing his colleagues to adopt an industrial policy for the U.S.
“Capitalism is always going to allocate capital to its most efficient outcome, but there are sometimes instances in which the most efficient outcome is not in our national interest,” Rubio said, arguing that recent shortfalls in medical equipment proved the point. “How do we bring certain industries back to the U.S., not because of protectionism, but because we need to be able to do these things?”