Gus Carlson is a U.S.-based columnist for The Globe and Mail.
Just as there’s no crying in baseball, no “I” in team and no place like home, there is no such thing as a free lunch.
Like so many sensibilities tested by the pandemic, however, this basic tenet of free-market economics – and point on the moral compass that guides the conduct of most reasonable people – is under fire, and unjustifiably so.
Consider the pushback by a coalition of businesses on the repayment of pandemic-era interest-free loans of either $40,000 or $60,000 from the Canada Emergency Business Account (CEBA). Ottawa says businesses that repay their obligations by Dec. 31 will have either $10,000 or $20,000 forgiven. After that, there will be no forgiveness and interest will accrue at the rate of 5 per cent.
Many lenders would say that’s a pretty good deal – maybe not a free lunch but a nicely discounted one. But it isn’t sweet enough for some business owners, who are asking Ottawa to extend the interest-free provision or even forgive a greater portion of these loans. This is needed especially, some businesses say, because the enterprises that stepped up to the CEBA trough are more likely to be owned by women and marginalized groups.
To be sure, the dilemma is something of a Gordian knot. Balancing the needs of the few with those of the many is never an easy task. And with some businesses that took CEBA loans facing extinction if the repayment terms aren’t eased, it’s a matter of the many picking their poison for the government – prop up the program or face a heavier unemployment burden.
Extending CEBA deadline would help marginalized businesses, groups say
For some, the moral dilemma on the part of Ottawa is real. One small-business owner told The Globe and Mail last week that she was wrestling with the decision of whether to repay her loan or invest in her company to take advantage of improving market conditions. Unlike some businesses, she at least seems to have a choice – even if there is only one right answer.
The revelation suggests Ottawa must find a way to determine whether those who took out CEBA loans have the means to pay them back or simply don’t feel like doing so – and what to do if it is the latter.
There is no lack of empathy here. Every economy is beset by forces beyond its control such as the COVID-19 virus. No one wants to see businesses go down. And there’s no question the pandemic hurt small businesses, especially those in service sectors hit by government lockdowns.
But taxpayers should be annoyed at the prospect of granting businesses relief on their loans, a real-life case of no good deed going unpunished. This is not small change. The loans were extended to almost 900,000 businesses, a total of $49-billion. As of March 31, only about one in five had been repaid.
Moreover, the cruel reality of a free market is that only the strong survive, even if everyone feels for the businesses that don’t make it.
Ultimately, this is about accountability and personal responsibility. There is an obligation – contractual and moral – to repay CEBA loans according to the terms set out by Ottawa. By refusing to pay, paying less than agreed to or extending interest-free repayment schedules out several years, loan holders are basically picking their neighbours’ pockets.
Perhaps it’s because these are government loans that some people feel they are consequence-free and there is more wiggle room in the terms. By not paying back a faceless bureaucracy, are defaulters really deadbeats?
What would happen if these same people decided they didn’t want to pay their mortgages or car loans? The consequences are clear. It will be interesting to see how many CEBA loan holders take advantage of offers by some banks to help refinance their obligations if they can’t meet the government’s deadline.
Also, the notion that businesses should get preferential treatment based on the gender or ethnicity of their owners smacks of social engineering. Is the inference that had many of those struggling businesses not been owned by women or racialized people they should be denied this latitude?
Free-market forces don’t discriminate. The proverbial rising tide lifts all boats, and they all fall on the ebb. Any relief measures should be appropriately equitable.
The bottom line: Small-business owners who ate the CEBA lunch should pay for it. If they can’t – or won’t – they should face the consequences. A free market is not for the weak.
That reality may not be fair, but they shouldn’t expect fellow taxpayers to pick up the tab. That’s not fair, either.