Some time had elapsed since Congress approved the CARES Act — which among other things, provided $350 billion in small business loan aid, known as the Paycheck Protection Program (PPP).
That funding quickly dried up and was extended another $320 billion by Congress in April.
The aid was doled out as quickly as was possible for such a massive program — so hastily that significant portions of aid went to larger businesses such as Shake Shack, who later returned its grant.
But the sheer size of the program and the rules accompanying it created burdening strains on those very recipients it was intended to help.
Business owners across the country — such as Dallas salon owner Shelley Luther and Lubbock bar owner Michael Clintsman — received funding but were afraid or unable to use it because of the Small Business Administration rule that 75 percent of it must be used on employment costs.
Not all business models are the same, and not every state has implemented the same operating restrictions. Spending three-fourths of their aid on employment that, for some, was no longer an expense because of mandated closures, became an impossible task.
Additionally, the CARES Act included $600 in unemployment insurance per person more than the normal amount. This has created another hurdle for business owners — who were required to rehire their employees within eight weeks to have the loan forgiven while faced with an employment base making more on unemployment than they were while employed.
Roy and Phillips not only saw this playing out at a national level but in their very communities.
Roy told The Texan, “I was hearing constantly from these business owners, ‘I’m scared to spend the money because we don’t know when we’ll be able to open. And we don’t know if we’ll be able to rehire our employees in time to follow the constraints in the bill.’”
Time is of the essence with this issue. As of early April, nearly 20 percent of Texas’ bars and restaurants had closed their doors permanently due to the shutdowns.
“These restaurants and music venues are a part of our cultural fabric here in Austin, and many community staples are closing down because of this.”
For Roy — who had his first date with his wife, Carrah, at Stubb’s BBQ in downtown Austin for a Willie Nelson concert — the loss of community features such as Shady Grove and the struggling of many establishments like Stubbs through the pandemic, highlighted even more the importance of this issue.
Roy and Phillips’ bill, as introduced, would remove that 75 percent requirement entirely, extend the rehire date to December 31 from the original June 30, eliminate mutual exclusivity of PPP loans and payroll tax deferments, and extend the loan repayment to five years instead of two.
In the final bill, rather than being eliminated entirely, the 75 percent requirement was lowered to 60 percent. That change was already being negotiated, according to Roy, with the treasury and the Senate.
Nonetheless, it provides more cushion for businesses than previously existed, enabling them to use more of their loan towards non-employment costs such as rent, electricity bills, or operating costs.
Roy added, “One of the things [Rep. Phillips and I] agreed on was that we ought to, where possible, have simple, targeted bills that are easy to understand and do not address multiple subjects.”
Congress is, and has been long before Roy took office in 2019, quite fond of massive, or “omnibus,” legislation in which many different actions on diverse or unrelated topics are consolidated into one piece of legislation.
The CARES Act itself is somewhat an omnibus bill, but it does address one sole issue — the pandemic-caused shutdowns — just through many different methods.
Meanwhile, Roy and Phillips’ bill, while an amendment to the CARES Act, is tailored to one singular portion: reforming the Payment Protection Plan.
Taking these simple, targeted approaches, Roy says, enables better coalition building in support of the reform. Yesterday morning, before the vote, Roy’s team released a list of over 80 different organizations supportive of their legislation.
“Compromise breaks down when you have these massive bills — cooked up in smoke-filled rooms with all kinds of goodies in them — dropped on the floor with a gun to your head telling you to vote to pass them, take it or leave it,” the Central Texas Republican said.
Roy and Phillips went about this in the exact opposite fashion.
To that end, Roy explained, “Dean Phillips and I grabbed a beer together, got to know each other, and figured out what makes each other tick. Obviously, we disagree a great deal — him being a Minnesota Democrat and me a conservative Texas Republican — but we realized there were a lot of things we agreed on.”
One of those things was the continuing operation of the two-decade-old National Defense Authorization Act — specifically, that it hadn’t been updated to define whatever new mission the military has overseas.
Another was the need to reform PPP to better enable businesses to weather the storm thrust upon them by COVID-19 and the subsequent government-mandated shutdowns.
The engrossed bill itself is only 10 pages long. It was supported by House Leadership, Democrats, and Republicans alike. Rep. Thomas Massie (R-KY-04) was the lone “no” vote.
Roy and Massie are close, and the former has defended the latter after he’s taken unpopular, but principled political stances. Roy laughed a bit that the only opposing vote had come from a friend.
Massie had serious reservations of the CARES Act generally, many of which Roy shared. Supporting Roy’s bill, in his mind, would be — put more delicately than the Kentuckian did — akin to shining something unpolishable.
But neither take it personally as they’ll likely unite again on the next hot-button issue that will make its way to Congress.
Roy further added that the PPP was an important facet of the legislation because he sees it as a sort of restitution for a regulatory taking by government — similar in scope to eminent domain which requires just compensation under the Fifth Amendment.
He stressed, “Government has taken action depriving a business owner of his or her own ability to carry out their livelihoods, and so it is an important and appropriate role for government to step in to help.”
“It’s not a stimulus or a bailout,” Roy stated, speaking of the PPP loans, “but rather letting you carry out your livelihood while the government is engaging in these rhetorical and statutory shutdowns.”
Another aspect Roy pointed to helping get this bill across the finish line was the in-person exchange of ideas — something that doesn’t happen if members are not in town. The House, earlier this month, voted to permit proxy voting in order to prevent the need to cast their vote in person.
Roy is one of the more outspoken members against this practice, and is even part of and advocating for a lawsuit against House leadership on the grounds that proxy voting violates Article I of the Constitution.
“It’s critically important that we go to D.C. and interact with our colleagues to do our job,” Roy emphasized.
Roy credited Phillips significantly for facilitating the passage of the bill. Phillips secured a promise for a vote from House Leadership in mid-May by agreeing to support the HEROES Act and whipped support on the Democratic side — while Roy did the same on his side.
“We ought to be able to focus on those tight measures to ensure that what we’ve already enacted becomes successful,” Roy added, emphasizing the tailored nature of the bill which prevented it from becoming a partisan flashpoint.
That approach, Roy emphasized, should be used for the rest of the government’s relief efforts where efficiency and precision standards are not being met. “Targeted policies that will help spur economic growth will go farther than massive spending bills,” he continued.
One such policy is preventing the regulations that have been rolled back to increase response efficiency to the pandemic, which Roy authored legislation to accomplish, creating a “reverse sunset review” commission.
“Cut regulations, cut taxes, let’s get this economy humming again.”
Roy is one of the most forthright drum-beaters in Congress — both in relation to Democratic and Republican spending — on the increasingly periled nature of the national debt, which now sits above $25.7 trillion. The debt has surpassed our GDP, something that only happened once before during World War II.
When asked how that concern is balanced with the government’s responsibility under the Takings Clause, Roy said, “This is really shining a light on the importance of fiscal responsibility.”
“In Washington, we just spend money and print it, and now we’re seeing the consequences of that,” he added.
It’s not just the nation’s capital that has a spending problem. State and local public pensions in Texas have amassed $86 billion in unfunded liabilities — or debt owed to pensioners.
Roy is hopeful that this unprepared-for pandemic has forced those in Washington, and government at all levels, to realize the importance of being prepared for a rainy day.
The pandemic has proven to be quite the rainy day, now stretching into its fourth consecutive month.
Reiterating his Takings Clause point, Roy said, “I’m not as bothered by a limited, defined amount of spending to make people’s livelihoods whole again after government acted.”
“But we have to get on a path to fiscal sanity and recognize the moral hazard of the federal government being the financial backstop for the state and local governments that have actually shut down economic activity,” he emphasized.
Reasonable compensation should not be limitless, he stipulated, saying that at some point — once the government restrictions are lifted — consumer behavior, not governement, will be the cause of financial strife, and then business models must be adjusted.
Since the bill’s passage, Roy said the focus has been on ensuring its approval in the Senate. Despite being only a third of the way to the procedural finish line, ensuring its passage through the House was a huge win for Roy, Phillips, and small businesses across the nation.
“There’s been massive amounts of support — a firm recognition of the benefit of having a bipartisan effort move something through quickly by focusing on actual problems that need to be solved,” he added.
As for the trajectory of the Paycheck Protection Flexibility Act, Roy said, “We need to move this quickly so these businesses can get the help they need.”
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Brad Johnson
Brad Johnson is a senior reporter for The Texan and an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.
