A Government-Backed Line of Credit Would Help Small Businesses More Than Current Relief Efforts

5 Pages Posted: 5 May 2020

See all articles by Veronique de Rugy

Veronique de Rugy

George Mason University - Mercatus Center

Arnold Kling

George Mason University

Date Written: April 22, 2020

Abstract

In an effort to provide relief in response to the COVID-19 pandemic, Congress charged the Small. Business Administration (SBA) with the task of administering a variety of credit programs, in part with the help and guidance of the US Department of the Treasury.

Unfortunately, not only is the SBA too small to manage such a huge responsibility, it also has a long record of poor performance in times of emergency. There is no reason to believe that this effort will be different; the program as administered through the SBA will predictably serve small businesses poorly. To better help small businesses, Congress should create a government-backed line of credit. This would allow businesses to survive by giving funds — without red tape — to businesses that are facing increased demand right now.

In this brief, we suggest an alternative that is more likely to prove helpful: a government-backed line of credit — one neither extravagant nor insignificant — for every American.

Keywords: healthcare, coronavirus, coronavirus pandemic, COVID-19, public health, economics, quarantine, economy, economic crisis, small business, stimulus, business loans, business financing

JEL Classification: I00, I18, H80, H81

Suggested Citation

de Rugy, Veronique and Kling, Arnold, A Government-Backed Line of Credit Would Help Small Businesses More Than Current Relief Efforts (April 22, 2020). Mercatus Special Edition Policy Brief, Available at SSRN: https://ssrn.com/abstract=3592932 or http://dx.doi.org/10.2139/ssrn.3592932

Veronique De Rugy (Contact Author)

George Mason University - Mercatus Center ( email )

3434 Washington Blvd., 4th Floor
Arlington, VA 22201
United States

HOME PAGE: http://www.mercatus.org/scholars/veronique-de-rugy

Arnold Kling

George Mason University ( email )

4400 University Drive
Fairfax, VA 22030
United States

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