Does Receiving Bailouts Increase Support for the Social Safety Net?

• In Event: Policy Attitudes and Preference Formation

Abstract

In the peak of the public debate over Obamacare, popular media accounts frequently highlighted instances where those most fervently opposed to the expansion of healthcare were, in fact, people who were personally reliant on government assistance. This example raises a broader question: How does the personal experience of benefiting from government largesse shape attitudes toward the social safety net and the role of government more broadly?

On the one hand, receiving assistance from the state may generate broader awareness of the importance of social insurance for people in need. On the other hand, recipients of government assistance may feel resentment toward the perceived “handout,” and grow less supportive of the welfare state. A third possibility is that PPP would have no effect on attitudes toward other policy domains because: 1. people perhaps struggle to connect their personal experiences with broader policy questions; or 2. people may perceive themselves as deserving of benefits and others as undeserving, and therefore compartmentalize the domains.

Disentangling between these responses is challenging empirically as the need for government assistance is not randomly assigned. Hence, correlations between the status of welfare recipients and political views may be spurious. To overcome this empirical challenge and address the question above, we utilize a unique test case where the need for government assistance came from a completely unexpected source and the recipients of aid were not people who typically rely on the social safety net. Specifically, we conduct a unique survey of small business owners in the United States. Using a Freedom of Information Act (FOIA) request, we obtained a list of small business owners who received economic assistance as part of the Paycheck Protection Program (PPP) in 2020. The PPP was part of the Coronavirus Aid, Relief, and Economic Security Act (CARES), one of the largest economic stimulus programs in American history that provided over $2.2 trillion in payments across the country in the wake of the Covid-19 pandemic. In particular, PPP provided $953 billion in low-interest forgivable loans to small businesses to keep them afloat during the pandemic. The purpose of PPP was to ensure that small businesses would continue to be able to meet payroll and continue to employ workers even as business activities declined.

We construct a unique sampling frame, collecting the contact information of PPP recipients using various sources including business directories. From this sampling frame, we obtain a random sample of 700 business owners who received PPP funding. Within a survey administered to these recipients in 2024, four years after the start of the pandemic, we randomize whether respondents are reminded of the PPP funding they received. We then assess whether making government support salient affects attitudes on other forms of social insurance connected to the welfare state: (1) spending on healthcare for the poor; (2) spending on nutritional assistance for the poor; and (3) spending on income assistance for the unemployed. We also collect data on whether recipients believed the PPP program justly distributed funds to assess potential heterogeneity in the treatment effect.

Our study is also unique in that we are able to connect survey responses to administrative government data, allowing us to explore potential sources of heterogeneity by PPP funding level, industry, and geography.

If we find that making the PPP salient increased support for welfare state programs, it suggests there are conditions where experience with social safety nets can increase support for the welfare state, even among people who are a priori hostile to such efforts. A positive effect of the PPP program would indicate that one of the reasons why support for the welfare state is low is that people often do not personally experience hardship and risk.

On the other hand, if we find weak effects of making the PPP salient, it rules out potential explanations for why support for the welfare state is low, particularly among business elites. Unlike many forms of government support (e.g., the mortgage interest deduction), the PPP was not part of the “submerged state” (Mettler 2011). It was a massive and salient form of government bailout for the middle class. Hence, making government support for the middle and upper classes more salient may not automatically increase support for the role of government in society generally.

Authors

• Neil Malhotra, Stanford University

• Saikun Shi, Stanford University

• Yotam Margalit, Tel Aviv University