Unsanitized: The K Street Bailout Would Apply to Practically Every Trade Group

Plus, reopening stumbles. This is The COVID-19 Daily Report for May 12, 2020.

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First Response

Joe Biden today called for an independent inspector general to review every stimulus loan given to an insider for corrupt dealing. But in a case of the call coming from inside the house, perhaps the most corrupt deal we’ve seen yet is the effort, approved by Nancy Pelosi, to allow corporate lobbying firms to get a slice of Paycheck Protection Program (PPP) loans intended for small businesses. Now we have some data on who exactly would qualify. And the answer is: everyone.

Last week, H.R. 6697 was introduced with 70 co-sponsors, including 54 Democrats. The bill would cut lobbying firms and trade groups organized through Section 501(c)(6) of the tax code into the PPP. Lead sponsor of the legislation Chris Pappas wrote in a press release that all 501(c)(6) organizations with 300 employees or less would be eligible. The sponsors claim that this would mainly help local chambers of commerce through a rough patch.

But the Democratic Policy Center, a new organization that uncovers corporate influence, analyzed IRS data (which is public for nonprofits like (c)(6) groups), finding that this provision would apply to 99.8 percent of all trade groups in America. That includes 727 of the 733 trade groups headquartered in Washington.

Read all of our Unsanitized reports

This includes powerful trade groups like America’s Health Insurance Plans (168 employees), which reported $62 million in revenue in its last tax return. The U.S. Chamber of Commerce’s Institute for Legal Reform, the lead lobbyists on making businesses immune from lawsuits from workers or customers who contract COVID-19 on their premises, has only 33 employees. The Koch network’s (c)(6) Stand Together, which took in $160 million in its last tax return in 2018, employs 143 people. Other groups, from the Independent Community Bankers Association to the American Chemistry Council to the National Association of Home Builders, would also qualify. And groups slightly above the 300 employee limit, like the National Restaurant Association or the American Petroleum Institute, are doubtlessly working to find a way to reclassify employees to get under the limit too.

The voluminous data set is here. In a statement, co-founder of the Democratic Policy Center Andrew Perez said, “It's unbelievable that Congress is working to bail out big lobbying groups right now, under the guise of coronavirus relief, instead of helping the millions of people who can't pay rent. We won't let them sell this lobbying group cash grab as support for small businesses.”

Now, you might ask me why I, who just got done yesterday writing about how these witch hunts against companies getting PPP loans are counter-productive and stupid, would be so irritated by putting trade groups into the mix. After all, these loans are capped at $10 million, not a bank-breaking number for these organizations. And if the money is lying idle, shouldn’t somebody get assistance and avoid being laid off?

I do think that lobbying firms getting public funds represents something different, for several reasons. Making them eligible for PPP would amount to Congress donating to the lobbying campaigns intended to influence them. They would be paying the salary, in the short term, of the people that come to them looking for special assistance for their corporate clients.

More important, lobbyists already got bailed out, in effect, when corporations got bailed out. This is kind of the ultimate in double dipping; corporations are nursed back to health by the sheer force of Federal Reserve commitments, this allows them to keep their lobbying expenses up, and then lobbyists lobby for free money for themselves! Google “lobbying frenzy” and you will find that lobbyists are not hurting during the pandemic. You can work from home and influence public policy. This is completely unnecessary.

Think about, for example, the Pharmaceutical Research & Manufacturers of America (PhRMA). Drug companies will make out like bandits with coronavirus tests, treatments, and vaccines. But PhMRA has only 276 employees and would be eligible for a $10 million top-up, despite $459 million in revenue in 2018.

Third, given what we know about the revolving door and how members of Congress inevitably rotate to K Street after their service ends, this becomes a case of lawmakers giving public money to their future employers.

Fourth, Treasury Secretary Mnuchin is talking about changing the law so the PPP works better for local restaurants. At that point it really would be trade groups taking money away from the corner pizza shop. The National Restaurant Association, one of the trade groups lobbying for those changes, could try to make itself eligible for the loans ahead of its clients. The Independent Community Bankers Association or the National Credit Union Association could take a bailout when its members determine who gets PPP support. None of that makes sense.

Finally, this is a political nightmare. You’re going to hand out cash to lobby groups already perceived as owning the government? Now that we know that essentially all trade groups would apply, Pelosi and the Democrats supporting this can make a choice. They can reject the most corrupt proposition yet in the coronavirus response, or just move their offices over to K Street now and end the pretense.

Odds and Sods

Over at the Prospect, Jon Walker guided us through what it takes to actually obtain health insurance in the middle of the pandemic. It’s one of the more operatic flowcharts you’ve ever seen.

Dierdra Funcheon looks at whether Florida is ready for another housing collapse.

Daniel Hanley and Claire Kelloway find that restrictive repair service rules have idled ventilators and other key equipment when we need them most.

And Brittany Gibson laments how college students have fallen completely in the cracks, ineligible for federal relief and graduating into a jobless job market.

All of our coronavirus coverage is at prospect.org/coronavirus.

The Smell of Fear

The first states to actually tempt fate and “reopen” the country have found that reopening is a relative term. Restaurants are under restrictions to limit capacity to who can fit under social distancing rules. Some find it counterproductive to open under those conditions and would rather continue with takeout. And perhaps the biggest problem is the old “you can lead a horse to water but you can’t make him drink” problem. In fact, under the pandemic conditions, you can’t even lead the horse to water.

According to Open Table data gathered by Slate’s Jordan Weissman, restaurants in seven states that have “reopened” remain below the average bookings by 82 percent or more. Nebraska has never instituted a stay at home order. Their bookings are down 90 percent. This mirrors the crash in restaurant bookings we saw before the lockdowns began. People have other options than eating out when there’s a virus about.

In other words, the only way to reopen the economy is to end the public health emergency. People don’t really want to be warriors when the only reward at the end is a chicken sandwich at Red Robin. There’s no national pride in risking asphyxiation.

The real value to states from reopening is they can kick people off unemployment if they fail to show up to a reopened business that takes them off furlough. Some states are even setting up “snitching” websites so workers can report their employees and get them removed from the rolls. Reopening isn’t about the economy at this stage, it’s about keeping people poor to preserve state budgets for what God intended: tax cuts for millionaires.

But that calculation won’t last. Ominously, a survey of five countries by Kekst CNC finds that, even after a vaccine is widely available, large numbers of people say they won’t fly in planes, dine out, go to the movies or large gatherings, or use mass transit. Attitudes could change and people are likely to loosen up when the crisis lifts, but such sentiment would constitute a permanent state of depression. Fear will consume us all, not just the fearful.

Today I Learned

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