Emergency rule is killing small businesses
If you’re in the United States, you’re probably living through a government emergency. Whether it is COVID-19, droughts, or infant formula shortages, authorities across the United States are taking emergency action more readily than ever. The real crisis, though, is how this hasty expansion of government power leads to fraud and abuse at the expense of small businesses.
While many governors have taken steps to let their emergency powers expire, over a dozen states still live under COVID-19 disaster declarations. In many cases, the state of emergency allows authorities to restrict a range of economic activity. Take California, for example, where Governor Gavin Newsom retains the power to reinstate lockdowns, waive statutes to encourage vaccination and restrict so-called “price gouging.”
We shouldn’t be fooled into thinking that emergency powers have tapered off as the pandemic has slowed down. Across the country, emergencies and disasters are still being declared daily.
In New York, Governor Kathy Hochul and NYC Mayor Eric Adams announced an emergency over the monkeypox virus, granting them a wide range of authority to restrict citizen activities and collect data on ordinary Americans. The infant formula shortage, hospital staffing problems, and many other difficulties have also been labeled emergencies.
Each of these emergency declarations comes with orders that modify or create new rules for businesses and individuals; in some cases, they free up funds for those that apply. If we learned anything from COVID-19, it’s that moves like this disproportionately benefit wealthy people and corporations.
Consider the Paycheck Protection Program (PPP), which was offered by the federal government during the pandemic to help offset payroll costs during lockdowns. The funds were distributed without sufficient supervision. This led to egregious mismanagement -- an estimated 10% of the PPP money was wasted on fraudulent claims alone, and less than a quarter of the $800 million tapped for small businesses went to their designated targets.
Instead, over $500 million was sent to large companies and well-connected individuals who could game the system better than small-time entrepreneurs. Even A-list celebrities like Diddy and Khloe Kardashian were given millions of dollars, money that was supposed to go to small businesses.
The effects of such emergency regulations are clear. In NYC, the number of small businesses in 2020 collapsed by almost 45%. Yet somehow, Hochul and Adams still feel bold enough to seize emergency powers.
This is not just a “blue state” problem. In Texas, the policy failures at the southern border are being treated like natural disasters. Governor Greg Abbott has used the situation to justify his controversial migrant busing program. To meet the need for buses, Wynne Transportation secured a lucrative contract to transport migrants at approximately $1,300 per person, well above the typical rate of $300 for such a trip.
This kind of soft cronyism is not new, nor is it slowing down. A quick perusal of the Federal Registry for Disaster Declarations and Assistance shows the staggering number of special federal relief measures for those affected by inclement weather. There aren’t many datasets about where this money goes, but high-profile cases of disaster relief have resulted in fraud and abuse that appear eerily similar to the problems that plagued the PPP funds.
Emergency powers can undoubtedly be useful. However, when leaders rely on hastily enacted policies, small businesses lose out in the scramble to secure contracts or comply with rapidly-changing orders.
Local businesses deserve a seat at the table. Governors must be held accountable, especially when they’re doling out public funds. Like it or not, we’re living in a constant state of emergency. If we can’t end these disaster declarations we should at least get better at enduring them.
Sean-Michael Pigeon is a Young Voices fellow. He has been published in USA Today, the Boston Herald, National Review, and more. He holds a B.A. in Political Science and History from Yale University.