“While the American Rescue Plan is changing the course of the pandemic and delivering relief for working families, this is no time to build back to the way things were. This is the moment to reimagine and rebuild a new economy.”
As the Biden administration approaches the end of its first one hundred days in office, it has already made excellent progress in implementing its Build Back Better agenda. The agenda includes a number of initiatives to address the needs of small businesses and individuals who had been mostly ignored and/or suffered the greatest losses during the COVID-19 era.
Toward the end of February, the Biden team instituted rules that modified the latest round of the Paycheck Protection Program (PPP) to give small businesses with less than 20 employees 14 days dedicated solely to them to apply for relief. These rules also benefited, among others, the self-employed, sole proprietors, independent contractors, and non-citizens who pay taxes. At the end of March, President Biden signed a two-month extension of the PPP until May 31 of this year to allow the SBA more time to accept and process applications.
The $1.9 trillion American Rescue Plan, signed into law on March 11, provides billions of dollars directed at those who had not received much assistance in earlier stimulus rounds. The Rescue Plan includes: a new grant program for restaurants and bars to meet payroll and other expenses; funding for the Shuttered Venue Operators Grant for music halls and other concert venues; additional dollars for the PPP, and expansion of eligibility criteria to include previously excluded non-profits; and low interest loans with a priority for some of the funds to go to “severely impacted small businesses with fewer than 10 workers.”
The $2 trillion+ The American Jobs Plan, introduced on March 31, is an “investment program” directed at creating millions of jobs, rebuilding America’s infrastructure, and positioning the U.S. to outcompete China. It is far too early to tell whether that Plan will become legislation and, if enacted, what its final contents will be.
The Plan as currently constructed, though, is ambitious and far-reaching. It includes provisions that: target 40 percent of the benefits of climate and clean infrastructure investments to disadvantaged communities; invest in rural communities and those impacted by clean energy; bring clean drinking water and broadband to all Americans, including the more than 35% of those in rural America who lack access; and enhance the caregiving economy substantially, providing assistance at home and in community facilities by creating jobs and raising wages in the “care economy” for home care workers — primarily women of color — who deliver essential services.
A White House statement on The American Jobs Plan begins as follows, “While the American Rescue Plan is changing the course of the pandemic and delivering relief for working families, this is no time to build back to the way things were. This is the moment to reimagine and rebuild a new economy.”
Social Ventures and the Impact Economy
The Jobs plan provides a framework for that re-imagination and rebuilding. It is truly robust. One thing that could be done to make it even more robust is to add social ventures into the re-imagination and rebuilding equation.
Social ventures are enterprises that apply business principles to achieve both business and social goals. These ventures can amplify the Build Back Better agenda because they’re enterprises that apply business principles to achieve both business and social goals. These ventures can amplify the Build Back Better agenda because they have double bottom lines. Those bottom lines are profit and positive social impact.
Through this dual focus, social ventures have created what is known as the impact economy. The impact economy is comprised of “organizations and private entrepreneurs in the ecosystem of private companies, non-profits, and foundations whose missions involve addressing social challenges and other issues pertaining to the public good.”
While it is not well known, the impact economy and social ventures are major contributors to the growth and development of the U.S. economy. A 2014 paper by GovLab of Deloitte Consulting LLP revealed that, “The impact economy already includes enterprises that employ as many as 10 million and produce an estimated $500 billion in annual revenues in the U.S. alone.” A 2016 report by DC’s Economic Strategy stated that “The impact economy is one of the fastest growing sectors of the US economy, accounting for 10% of all jobs nationwide.”
Halcyon is one of the world’s leading organizations in social venture incubation and impact investment. In a policy white paper it prepared in January of this year, Halcyon noted that the federal government has played a critical role in the development of start-ups and social ventures. Halcyon went on to observe, however, that “…major avenues remain for the government to increase its role as a catalyst for creating new, impact-driven businesses and help scale the most effective and impactful businesses.”
Halcyon recommends numerous actions that the federal government should take to play that catalytic role. They include:
- Re-establishing and further empowering the Office of Social Innovation and Civic Participation in the Domestic Policy Council to include for-profit social ventures.
- Tasking the Small Business Administration with the development of unique programs aimed at providing loans and financial assistance to social ventures.
- Tasking the Department of Commerce with creating a Qualified Social Venture Tax Exemption.
- Providing guidance to the Minority Business Development Agency at the U.S Department of Commerce to provide technical assistance and resources to social venture founders of color.
- Asking Congress to bolster the Office of Innovation and Entrepreneurship at the Economic Development Agency to increase the impact of its Build to Scale grant program to include a social venture track.
- Starting in K-12 programs, empowering the U.S. Department of Education to allow for the design and deployment of curricula and training programs throughout the U.S. education system, focusing on the skills needed to start a social venture.
- Prioritizing social ventures throughout the U.S. government procurement processes, creating opportunities for early stage ventures to provide products and services across the U.S. government apparatus.
Halcyon’s recommendations call for a comprehensive government-wide approach to supporting social ventures. This is appropriate, given the importance these ventures must assume in America’s emerging new economy.
These “new, impact-driven businesses” can be of all types and in all industry sectors. They will be most important, though, in those industries and for those businesses owners and employees who were hardest hit by the pandemic.
As we noted in a blog in August, 2020 those industries, businesses, and business owners most impacted by COVID-19 were:
- Smaller small businesses, with fewer than 20 employees, which constitute the bulk of small business employer firms
- Non-employer businesses that have no paid employees except the owner. About one-third of these businesses are owned by minorities and 40 percent are owned by females
- Businesses in the retail, arts and entertainment, personal services, food services, and hospitality sectors
- Businesses with employees owned by African Americans immigrants, Latinx, Asians, and females
- Mom and pop establishments with fewer than 5 employees in older historic neighborhoods, and in cities and towns with fewer than 10,000 residents across the country
The employees who lost their jobs due to the pandemic were disproportionately low-wage earners, women, minorities, and those working in the leisure, hospitality, retail, personal service, and health care sectors. Add to this group gig workers, and workers in occupations funded by state and local governments.
The bottom line is that businesses and individuals in those sectors and occupations should be primary targets for creating double bottom line enterprises. Such enterprises could be start-ups begun by business owners who lost their business or jobs due to the pandemic, or by individuals driven by desire to become social entrepreneurs and to assist impacted individuals, organizations, or locales.
Government and Social Ventures
The nature of those social ventures and others should be determined by the founders, with the assistance of the government and investors. The government must play a pivotal role in nurturing and sustaining these ventures for them to become a part of the new economy.
Through its initiatives to date, the Biden administration has demonstrated that it understands the need to address the situations of those that have been left behind due to the pandemic, or as a result of the increasing inequality and decreasing opportunity in our country’s economic system. By ensuring that social ventures are an essential component of its agenda, the administration can bring all of necessary forces to bear to right the country’s economic ship.
That means more government involvement and investment rather than less. Some have cautioned to be careful in the Biden shift toward big government, and to ensure that the government focuses its attention where it has the essential expertise and experience.
For example, the Washington Post editorial board advises “…the government should do more of what it does best.” It goes on to explain that is in providing public goods but not in allocating investment capital and “picking winners among alternative industries, companies, technologies, and locations….”.
Steven Rattner, investment asset manager who led the rescue of the automobile industry in the wake of the 2008 financial crisis, and now writes for the New York Times, advises, “But given its vast sweep (Biden jobs plan) …the administration should increase its chances of success by leaning more heavily on private models for help and using tax incentives to a greater extent for efficiency.”
These are solid pieces of advice. They are not arguments against big government nor for small government. They are recommendations for good government.
Good government works the pivot points by addressing areas that must be leveraged and addressed effectively in order to effectuate change and achieve positive outcomes. In the first chapter of our book, Working the Pivot Points: To Make America Work Again, we examined pivot points in American history, what was accomplished through them, and what might have happened if they had been handled differently.
In 2021, the United States of America — this experiment, this fragile crucible we call our democracy — is definitely at a pivot point. Pivot points define the character and shape the destiny of a nation and its people. They establish the rules of the game and influence the attitude of the public. They create an upward or downward trajectory and accelerate or decelerate forward movement and progress.
Creating The New Economy
Good government does the right things and gets the right people and right organizations involved in doing those things. It does not work alone. It works in public, private, and social venture partnerships to achieve the goals of building back better and creating the new economy, which includes the impact economy as a central element.
Many have compared Biden’s programs and plans to the massive New Deal intervention that was initiated by President Franklin Delano Roosevelt in response to the Great Depression. There is definitely some resemblance in terms of the level of governmental assistance provided though the revision of the PPP eligibility and the enactment of the American Rescue Plan.
But the better comparison for the proposed American Jobs Plan— which has also been referred to as the recovery plan and the infrastructure plan , we believe, is to what happened with the GI Bill, from its passage in Roosevelt’s fourth term as President and implementation under the presidencies of Harry Truman and Dwight D. Eisenhower. The GI Bill, which became law on June 22, 1944, had three core provisions for World War II veterans: support for college education or training; loans to buy homes or businesses; and unemployment compensation for a period of up to 52 weeks.
By the time the original GI Bill ended on July 25, 1956, less than 20% of the money that had been set aside for unemployment had been used. In contrast, 7.8 million of 16 million veterans had participated in the education or training programs. And between 1944 to 1952, nearly 2.4 million veterans received home loans backed by the Veterans Administration.
The GI Bill, combined with the presidencies of Roosevelt, Truman, and Eisenhower, unleashed the American educational, entrepreneurial, and exploratory spirit, and generated new economic benefits for most citizens (except for minorities). Eisenhower’s emphasis on national infrastructure, highlighted by initiating the construction of the interstate highway system, bolstered the creation of the new economy of that time.
Biden’s plan has the potential to do the same unleashing in the 21st century. It provides the basis for government to be a leader again, in collaboration with its partners to reimagine, reinvent, and renew America.
Most economists, including Federal Reserve Chair Jerome Powell, are now saying that the American economy is on the way toward a strong recovery. Given that, is there really a need for an intervention of the scope and nature of that being proposed by the President?
We believe there is a need for an intervention of this type, but will leave it to the legislators to determine the final size of such a jobs/recovery/ infrastructure plan and how it should be paid for. We also believe, regardless of the final content of the bill, that it must include social ventures as partners in building the new economy.
Our belief in this regard is prompted by the fact that on April 8 when Chairman Powell announced that there were many factors putting the nation “on track to allow a full recovery of the economy fairly soon,” he also issued a caution. As Christopher Rugaber reported for the Associated Press, Powell emphasized, “It’s important to remember we’re not going back to same economy. This will be a different economy.”
During his remarks, Powell stated that many Americans who are out of work will struggle to find jobs because some industries will likely be smaller than they were before the pandemic. He commented, “I think we need to really as a country — and I’m not talking about any particular bill — invest in things that will increase the inclusiveness of the economy and the longer term potential of it, and particularly invest in people so that they can …benefit from the prosperity of our economy.”
Social ventures are part of the key to increasing that inclusiveness and building that longer-term potential. America’s new economy is on the drawing board. Those who start, invest, and scale those social ventures will draw upon Americans’ heads, hearts, and souls to ensure that drawing of America has a head, heart, and soul that is open and welcoming to all.