President Donald Trump and congressional leaders announced the $2 trillion economic stimulus package — the Coronavirus Aid, Relief, and Economic Security (CARES) Act to great fanfare, touting the deliverables of different aspects of the provisions and their belief in its ability to slow the economic tsunami exacerbated by the novel coronavirus pandemic. One of the major selling points is a $1,200 one-time payment to adults.
The pandemic has cut a wide and deadly swath through communities across the country, overwhelmed the medical infrastructures of places like New York City, Detroit and New Orleans, and brought much of America’s economic activity to a standstill. At the time of this story, the grisly tally in the U.S. stood at 356,942 confirmed cases and more than 10,524 deaths. New York is still the epicenter with more than 122,031 confirmed cases and almost 4,159 deaths.
In a desperate effort to blunt the spread of COVID-19, state governors have ordered as many as 230 million people to stay home, which has brought commerce to a virtual standstill. Along with the sudden and brutal decline of the much-vaunted, record-setting stock market, the economy began a free fall dragging with it jobs, businesses — large and small — and the destinies and fortunes of tens of millions of American workers.
Compared to other small business owners, African Americans have generally had to face more daunting challenges such as smaller cash reserves to draw from, difficulty in securing bank loans and other financing and being sole proprietors or “mom and pop” establishments that are ineligible for most small business loans.
Businesses big and small have been ravaged, with the hardest-hit sectors being the travel and hospitality industries and the retail sector.
Financial planner and wealth manager Ivory J. Johnson acknowledged that COVID-19 has shaken up U.S. businesses and hit Black customers hard.
“It’s having a tremendous effect,” he said. “Cash flow just stops. Ten percent retail, 10 percent of restaurants, 20 percent of the population just stopped. This is the end of the business cycle, we’re at peak employment where wages go up, corporate money gets squeezed and they fire Bob,” he explained.
“People didn’t have time to pivot. For Black business, access to capital may not be there and Black customers are going to be hit very hard. It’s going to be a challenge for all businesses. You have to figure what you need to do now.”
He characterized the relief package as “keep-the-light-on money,” likened the U.S. economy to a Ponzi scheme with the U.S. government printing money “out of thin air,” and said now that corporations — who are carrying between $4 trillion and $10 trillion worth of debt — face an economic reckoning, the realization is dawning that the way they’ve been doing business is untenable.
“They are now seeing that this isn’t sustainable,” said Johnson, who for the past two decades has helped families and small businesses create and protect wealth and has guided them to see the benefits of developing a financial game plan. “Nobody ever shoots Santa. People don’t care and weren’t complaining when they were making money.”
Johnson said the COVID-19 pandemic merely accelerated what has been happening to the economy, just at a slower rate.
“Here’s the reality: what happened is that they are creating money out of thin air, buying assets, feeding the Ponzi scheme,” he said. “They were rigging earnings, strip-mining stocks and buying back stocks, while the Federal Reserve pushed down interest rates and have been buying bonds and assets.”
Johnson, who founded Delancey Wealth Management. LLC in 2012, said 35 percent of small businesses couldn’t sustain a three-month shutdown, while 70 percent wouldn’t survive past six months.
He said the country is staring at the abyss. The unemployment rate during the Great Depression was 25 percent and financial experts are predicting that unemployment figures could reach that figure before all this is done. In late March and early April, about 10 million Americans filed for unemployment. The next jobs figures are expected to be considerably higher.
Veteran labor organizer Bill Fletcher Jr. said there are a couple of layers to consider when contemplating the effect coronavirus will have on African Americans.
“One is the question of the impact of the crisis on Black America and Black businesses. One of the things that we’re going to have to deal with in this country, irrespective of race, is going to be trauma,” he said. “I think that it will have a particular type of impact on Black America — looking at illnesses and a further elimination of wealth, along the lines of 2008 crash,” Fletcher said.
“African Americans never really recovered from the housing crash and economic meltdown and that reality is going to be a very important factor for Black people, especially since the U.S. may be going into some form of depression,” said Fletcher, former president of TransAfrica Forum and a senior scholar with the Institute for Policy Studies. “I saw a report last week that shows the Washington metropolitan area could lose 35 percent of small businesses. Add a layer of race onto that — lower savings rates and profit margins and most small businesses not able to sustain themselves for three months — and the problem becomes clear.”
What comes out of this crisis will be equivalent to the aftermath of a war, he said.
“It’s not like coming out of a recession with the infrastructure intact. Even if the number of people who die isn’t as high, we’re looking at high levels of devastation economically,” Fletcher explained.
Marc Morial is one of a number of critics who don’t believe the package goes far enough and said he and others in the civil rights and business communities will have to push just as hard as they have to ensure that more is done for African American businesses. He said he doesn’t have to look too far to see the impact of the pandemic on small Black business owners in New York, where he lives.
“My barber is closed down. That’s where three people work. It’s their livelihood,” he said soberly. “Every barbershop, every hair salon has been closed down.”
Morial, president and CEO of the National Urban League, said he, other civil rights organizations and their allies fought fiercely to ensure that Congress wouldn’t pass a bill that completely ignored African American businesses at perhaps their time of greatest need.
“The $2.2 trillion recovery relief plan is a down payment,” Morial told The Final Call. “In the best-case scenario, it will offer two months relief for small business owners and four months relief for unemployed workers. There is a need for them to go back. We fought hard in discussions, along with the Congressional Black Caucus (CBC), to ensure, for example, that lending platforms would be open to nonprofits, sole proprietors and mom and pop stores.”
“The language is broad and inclusive, and the execution may take a while. We have to lean in on this opportunity hard. African American business owners shouldn’t sit around and wonder if they should apply. Apply! We have to put pressure on the process for it to serve us.”
Morial said, “There will definitely be a need for more money and we’re working with Rep. Karen Bass to see what the next package will look like.” President Trump signed the bill March 27.
Ron Busby, president and CEO of the U.S. Black Chambers, Inc. (USBC), played a similar role as Morial pressing lawmakers to include provisions favorable to African American businesses.
“I want readers to understand that in the 700-plus page bill, nowhere was the word ‘Black,’” said Busby, who serves on the Pfizer Small Business Council, National Newspapers Publishers Association Foundation Board of Directors, and White House African American Leadership Council. “It is a race-neutral bill, has nothing to do with Black people. The U.S. Chamber advocated to keep it race-neutral to ensure that the bill would get support. Congress felt it would be easier to get passed that way.”
Busby said while $2 trillion seems like a great deal of money, $349 million will go towards the Small Business Administration’s Payment Protection Program (PPP).
“That also seems like a great deal of money but it’s not enough funding,” he said. “It will be very difficult for Black and small businesses. We fought for small, Black-owned businesses, fought for a couple of things — to ensure that businesses wouldn’t be canceled because of supply chain issues and problems with developing products and widgets because of the epidemic. We also fought to get a ‘front-pay’ program where businesses would get paid in the next 15 days.”
“The federal government is notorious for slow payments of 60, 90, 120 days — and most Black-owned businesses are more interested in and dependent on cash-flow. They (negotiators) pulled it out at the last minute but they said they will continue to pay businesses through the disruption.”
Busby and other observers say most Black businesses have small payrolls and use what is called 1099 workers and contract employees, but if business owners apply for the PPP, it will pay 100 percent of their payroll for the next three months. Some aspects of the plan are still vague, saying he’s not sure how the wording will be received at banks, he added.
Ohio Congresswoman Joyce Beatty and Rep. Dwight Evans of Pennsylvania told The Final Call that the good news is that small businesses including those who work as 1099 employees, beauty and nail salons, painters and others who are self-employed will have an opportunity to participate.
“April is when they can first apply,” she said. “The good news is that dollars are available. It’s first come, first served. It was important for us to make sure that individuals who work as contractors weren’t left out. We can’t make a commitment that everyone will get in but people should prepare their packages, go to the Treasury website and download the application package.”
Beatty, who is vice chairman of the Small Business Committee and serves on the Committee on Financial Services and the Consumer Protection and Financial Institutions subcommittee among others, said she has worked very closely with Chairman Nadya Velasquez and other committee members.
“CBC members have stepped up. We’re teaming up and working together but there are a lot of devils in the details, especially those not in the traditional SBA,” said Beatty, who has served in Congress since 2013.
She said she and some of her colleagues met with civil rights leaders and will continue to do so as all of them try to stay ahead of this crisis.
Evans said providing economic distress loans, the PPP and $10 million for minority development agencies is very important and underscores the importance of small businesses.
“Small businesses are the backbone of our economy and it’s very important in terms of what these programs will mean,” he said. “We will probably need more money and jobs as ways to build wealth. Closing the income and wage gap and stabilizing and building Black businesses is a priority for Rep. Karen Bass.”
Beatty agreed with Morial and Busby that there’s much more that needs to be done to make sure that African Americans have a safety net during these calamitous times.
“The old adage is that when America gets a cold, African Americans get pneumonia,” she said. “What’s happening with coronavirus has exposed so many disparities. Disparities are being shown by the media. In Detroit, for example, 14 percent of the population is African American but 40 percent of those dying are African American. The increasing numbers of people who are incarcerated, homeless. We need to look at the total picture of disparities.”
Zeville Preston, a member of New York City’s Black Business Empowerment Committee (BBE), was scathing in her criticism of the relief package.
“This bill is D.O.A. (dead on arrival). We need something of value. Black blood and bodies built this country and as usual, once again, we find ourselves at the back of the line,” she said. “We’re 22 percent of New York City’s population but we are less than two percent of business and get less than two percent of the contracts, numbers which have declined over a five-year period. Black businesses dying on the vine and the governor cares not at all.”
“This is to put CBC on notice. They want people to think they did something, and they did nothing.”
A March 20, 2020 letter sent to the CBC points to 94 proposals to help African Americans that the body sent to Senate Minority Leader Chuck Schumer and House Speaker Nancy Pelosi, with only three speaking directly to Black people and only money allocated to Historically Black Universities and Minority Serving Institutions has a dollar amount attached to it: $450 billion. In their letter, the BBE expresses frustration and dismay: “The CBC’s 94 initiatives totaling $459 million basically leaves the Black business community with nothing, especially in New York state where all other ethnic groups and White-women’s participation far exceeds Black participation,” it states. “BBE is most disappointed that the CBC saw fit to argue the case for minorities, women and small businesses while neglecting to propose funding specifically for Black businesses. Harlem’s BBE finds this unacceptable!”
Preston said BBE is reaching out across American cities to see if business owners and others in the Black community are having the same issues.
“We’re figuring strategically to speak in one voice,” she said.