On accepting government grants, paybacks, subsidies (and the PPP in particular)

A number of free-society individuals and organizations I’m involved with have been arguing about whether it’s appropriate to participate in the US government’s Paycheck Protection Program (PPP), devised in response to the Covid-19 disruptions, shut-downs, and lockdowns. That particular program’s issues raise also more general issues of government funds.

So: my thoughts. (Speaking only for myself, not for any of the organizations I’m involved with.)

I see four distinct types of cases.

1. You’re an individual or organization forced to pay into a government program, and you also can withdraw funds from that particular government program. Action? Take the money. No problem. Example: Social Security.

2. You’re an individual or organization that pays taxes in general, but there are particular government programs out there one can pursue — subsidies, tax breaks, bailouts, etc. Action? Depends: on a sliding scale from simply recovering productive earnings (e.g., a tax break) to shifting costs of your own failures to others (e.g., a bailout). Unless:

3. You’re a tax-paying individual or organization, and the government does something directly to damage/impede your business — and it offers funds in a program directly intended as amelioration. Action? Take the money. No problem. Example: the PPP in response to lockdowns. (Some further detailings needed here — was the damage pretty small, can one entrepreneurially pivot to solve/fix, are there symbolic/morale consequences within you or your organization — but another discussion.)

4. You do not pay taxes. All non-profit organizations and many individuals are in this category. The “We’re just recovering taxes paid” argument does not apply here. The “Amelioration for government-caused damage” argument can apply. Though a special case: non-profits that exist precisely to promote the principles of a free society. They have a self-chosen, heightened responsibility to model those principles in action by being extra entrepreneurial and self-protecting (act-of-God clauses for canceled conferences, payroll insurance, contingency funds set aside, etc.).

For such non-profit organizations, entering into gray zones of government involvement, even arguable ones, also imposes internal staff-morale costs and external public-relations costs. Those are real costs, as in that gray zone it becomes difficult/impossible to remain fired-up about one’s principles and to communicate effectively that one is principled. Action? Better to underscore that being principled is the organization’s entire purpose for existing.*

* Addendum:

After I drafted the above, a smart friend pointed out that non-profits contribute to their employees’ Social Security as part of their payroll-administering responsibilities. Good point! So that could support a nonprofit’s participating in PPP — to cover or recover its portion of that and perhaps other payroll taxes.

I agree. But:

a) That would require some precise accounting calculations, i.e., to ensure that one is applying to PPP only for that portion of the contribution/taxes and only for the period the PPP covers.

b) That the administrative costs of doing the above calculating and tracking the allocation of the received funds don’t defeat the purpose of trying to recover costs.

c) That, as a freedom-advocating organization, one is publicly upfront that this and only this is the reason one is participating, i.e., that getting to this argument isn’t after-the-fact and/or only under public pressure.

d) That one recognize that one’s employees are in the future going to recover their Social Security benefits, and that if via the PPP the non-profit has recovered its portion of the contribution then that shifts the cost to other contributors/taxpayers down the road.

e) That by entering into this labyrinth of Byzantine/Jesuitical/Gordian Knot calculations and justifications, one realizes that one is acceding to the kind of mixed-economy/government practices that one uses as an argument for why, on principle, such mixed-economy/government practices should not exist.

[Update: My follow-up Open College podcast on the morality of accepting taxpayer/government support.]