By Campaign Legal Center’s Ethics & Federal Reform Teams
The out-sized role of money in our democracy means that those with the deepest pockets often have a disproportionate influence over policy—even amid a public health and economic crisis.
As Congress scrambled to piece together a relief package in response to the coronavirus pandemic, wealthy special interests leveraged years of lobbying and big political contributions to shape important elements of the $2 trillion bill.
The voices of average people were drowned out because they couldn't afford lobbyists and super PAC donations. Take the Small Business Administration's (SBA) Paycheck Protection Program (PPP), which was supposed to help small businesses struggling as a result of the crisis.
At least 43% of small businesses in the U.S., like neighborhood restaurants and family-owned grocery stores, were at risk of going under without assistance, but the first round of PPP funds went disproportionately to big businesses and corporate chains before the money ran out. In fact, around 300 publicly-traded companies received $1 billion in PPP loans.
Hotels and Restaurants
In part, that’s because trade associations and corporations pushed for provisions in the Coronavirus Aid, Recovery, and Economic Security (CARES) Act that allow hotel and restaurant conglomerates to qualify as “small businesses” if they have fewer than 500 employees at an individual location--even if the overall business has more than 500 employees. And, they lobbied to waive the SBA affiliation rules that would typically block corporate chains from being eligible for “small business” loans.
Trade associations like the National Restaurant Association and International Franchise Association, as well as restaurant groups like Yum! Brands, spent millions lobbying in the first three months of 2020, including on CARES Act provisions that ensure loans would be available to franchisees.
These exemptions are what paved the way for the scandalous disbursement of PPP funds to national restaurant chains like Shake Shack, Potbelly, and Ruth’s Chris (some of which subsequently returned the money).
The American Hotel and Lodging Association (AHLA)--which describes itself as the “singular voice representing every segment of the hotel industry including major chains”--spent $730,000 on lobbying in the first quarter of 2020, including on these provisions.
As a result, an AHLA member like Marriott International, for example, would not itself be eligible for an SBA PPP loan, but any one if its individual hotels, if it employed fewer than 500 people, would be eligible to receive government money.
The hotel chain exemption was exploited by Republican megadonor Monty Bennett, whose hotels and subsidiaries together applied for $126 million in PPP loans.
Bennett’s Ashford Hospitality Trust—a real estate investment trust that owns dozens of chain hotels--is a member of the AHLA, and Ashford itself also spent $20,000 in the first quarter lobbying the SBA, House, Senate, and Treasury Department on coronavirus relief issues.
The money was spent to hire Jeff Miller, a Trump Administration insider who raised over $2 million for the Trump Campaign and is known to visit Mar a Lago.
Ashford’s companies were highly leveraged even before the crisis, and Bennett’s companies applied for the taxpayer funds after its board paid millions in dividends to preferred shareholders—including to Bennett himself. (In the face of public pressure, Bennett ultimately pledged to return the loans received.)
Franchises
A lesser-noticed lobbying target was the SBA itself.
Under the CARES Act, certain franchises are only eligible for PPP loans if they are listed on a “franchise directory” maintained by the SBA. In practice, that ultimately meant that even though the SBA would not be directly issuing the PPP loans itself, it did become the gatekeeper for this key form of eligibility.
Lobbying disclosures suggest that, after the CARES Act passed, some turned their attention to lobbying the SBA to secure spots on the SBA’s franchise directory.
That directory, which is public, shows more than 100 brands so far have been granted franchise designations solely for PPP eligibility purposes.
One of those brands was 7-Eleven, which reported lobbying the SBA, Treasury, and the White House in the first quarter. Another was rent-to-own furniture and appliance chain Aaron’s, which was added to the franchise directory the same week it hired a new lobbying firm to lobby on “Issues related to COVID-19 impact on small business and franchisee lending.”
Meanwhile, many small franchises without connections to the large, high-lobbying national chains or trade associations have been left out and have had trouble securing a spot on the directory in time for a chance at a PPP loan.
Financial Windfalls
The CARES Act was pitched as a lifeline for struggling workers, and the PPP funds at least came with some strings attached: a PPP loan is forgiven only if at least 75% of the money goes towards keeping workers on the payroll.
But some lobbying interests managed to carve out financial windfalls that came with no conditions. The must-pass legislation was seen as an opportunity to advance longstanding policy goals.
For example, for over a year, the retail, restaurant, and hotel industries were pushing for a change to the tax code that would allow them to more quickly write-off renovation costs—and they got it in the CARES Act, despite the $15 billion tax break having little to do with the coronavirus pandemic relief.
Over a dozen trade associations and large corporations lobbied for including the tax break in the CARES Act and also gave over $1 million in political contributions in the first three months of the year alone.
The tax break language was adopted from an earlier bill, the Restoring Investments in Improvements Act (RIIA), which would similarly benefit large retailers—like Home Depot. Sen. Kelly Loeffler cosponsored the bill, two days after her campaign received two $5,000 contributions from the Home Depot PAC. Less than a week later, Home Depot CEO Bernard Marcus and his wife together gave $11,200 to Loeffler’s campaign.
Industry lobbyists argued that the investment tax savings could help retailers cover payroll and rent during the coronavirus pandemic. But the $15 billion tax cut has no strings attached: there is no requirement that the tax savings be used to help workers. And the tax benefits will last after the crisis passes.
And then there was the $170 billion tax break that disproportionately benefits real estate investors who earn over $1 million per year. Several corporations and trade associations lobbied on that tax break, too. And wealthy donors tied to the real estate industry gave at least $34 million to super PACs in just the first three months of 2020, according to Campaign Legal Center's (CLC) analysis.
Structural Reforms
With at least 22 million people out of work, millionaires and billionaires are not the ones hurting the most in this economic crisis. But they are the ones who can afford to write big super PAC checks and to hire lobbyists to push their industries’ interests.
The big money dynamics that shaped the CARES Act underscore why we need structural reforms, like those included in H.R. 1, the “For the People Act,” passed by the House last year.
But more immediately, given that the Treasury Department is now slated to hand out $500 billion in business loans, these dynamics demonstrate why transparency and accountability over the distribution of these funds is so vital: without effective oversight for how federal funds are distributed, there is no way to ensure that the money is helping Americans that need it, rather than flowing to the wealthy and well-connected.
