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PPP is just a 'band-aid for two months': Howard Schultz

Former Starbucks CEO Howard Schultz created a fund that provides immediate cash relief for out-of-work restaurant workers in King County. He joins Yahoo Finance’s On The Move to discuss the importance of coronavirus relief, recent jobless claims and lack of COVID-19 testing.

Video Transcript

ADAM SHAPIRO: $349 billion is gone. What next can we do if Congress isn't going to appropriate more money to help men and women get the money they need just to get through the crisis, Howard?

HOWARD SCHULTZ: Well, thank you for having me. And I think, as you did so well, the headline today is the SBA and PPP is out of money. And I think-- let me just walk you through what we have been doing in Seattle over the last few weeks and why I think this is so central to the issue facing most Americans today. In Seattle, you know, the engine of the economy, the politicians are so well to speak about that consistently, is small business is the engine of the economy. However, small businesses and restaurants in America are now facing significant challenges.

In Seattle alone, 3,000 restaurants are closed. 100,000 hardworking people, through no fault of their own, are out of work. So over the last few weeks, our family foundation and many people in Seattle have helped us raise almost $7 million. And with that, we've got $500 of cash in the hands of every person who applied for the loan-- I'm sorry not a loan, the cash. And we got $500 in their hands as a bridge.

The interesting thing and the challenge here, most of the people we've talked to still haven't gotten any financial assistance from the government. Now, the bigger issue today is as I talk to these restaurant owners and small business owners, yes, PPP was designed to do a good thing. But for those people who even got it, but most of them didn't, that is just a Band-Aid for two months. The question really is how do these restaurants and small businesses reopen?

So the government needs to face the fact that not only do we need a next tranche of money, but we need an understanding-- a comprehensive understanding that in order for these small restaurants and businesses to reopen, most of which can not, we need a significant level of money. And from my perspective, the best way to do that would be if the government would be a backstop for the banks. And the banks can provide small business loans that actually could be forgiven over the year or low interest and so these people can reopen.

Now, the question I think you must ask yourself is what is the economic carnage? What is the fallout if 40% of America's economy-- small businesses and restaurants-- do not reopen? The millions of people who will be unemployed, the economic carnage-- it will be incalculable. And if we wait two months to get this done, it'll be too late. They will have closed their businesses. They will not-- there will be no connective tissue to them. The government must act now-- not for another Band-Aid, but a comprehensive solution to allow these people to reopen. That's the issue.

JULIA LA ROCHE: Howard, it's Julia La Roche. And I think what you're pointing out that, you know, small businesses really is the engine of our economy. And you talk about the rhetoric. It makes me wonder where the disconnect is here, because it just seems so glaringly obvious that you have to do something for small business. Do you just think that the government might be focusing too much on big business at this point?

HOWARD SCHULTZ: You know, I think-- listen, I think the government tried to do their best, but it was rushed. It's not perfect. But yes, the way this thing has been structured, it is basically a big business coauthored program. Small businesses have been left behind. They have no voice. They have no resources. And when you sit down, as I have in the last few weeks, with restaurant owners and small business owners who either couldn't qualify for PPP or didn't get access to it, it is heartbreaking.

They have put their life savings and their work into these businesses, and they have no way to survive. The issue right now, as I just said, is if we don't act soon, they will not be able to reopen. And so PPP was just designed for a two-month ban. But what we need is a bridge to the vaccine. The vaccine is going to take 12 to 18 months. Small businesses in America need a economic loan bailout or some way to survive through the vaccine. That's the issue.

JULIE HYMAN: Howard, this is Julie Hyman here. At the same time, because of this frustration on the part of small business owners, some of them have said we don't want to close, right? We just saw footage from that protest in Michigan where people were saying they were not going to abide by the shelter in place orders-- which, of course, reflects some of what you're talking about, this frustration with not getting that aid. But what do you think needs to happen on the leadership level as well to get everybody on the same page, provide support at the same time? I mean, it's a tough job.

HOWARD SCHULTZ: I think that's a very good point. I think many of the small business owners are complaining that there's no transparency and no understanding about where things stand. So if a governor of a state submits a tweet and that's how people find out that they have to close their businesses or they have to put in place a mechanism to open up their business and they don't know when it's going to happen, they don't know how it's going to happen-- so these small businesses are in the dark in terms of when is there going to be a reopening of some kind, and what is the restrictions of how they're going to be-- how they're going to open.

But the federal government and every governor needs to work together to create a system in which people can understand what the rules of engagement are going to be. But one thing is for sure-- consumer behavior and the pattern recognition of the past is going to change dramatically once the the economy and the country reopens. For restaurants specifically, this means that they will be probably operating at 50% of capacity. They won't be able to survive.

And so not only does the government need to understand that they need money to reopen, but they're going to need resources to reopen in this new world or else they're all going to be gone. And I think three months from now, people are going to be saying, I wish I would have understood how challenging these issues were for these small businesses and restaurants. We would have done something different. Now's the time to understand-- we need to do something different now, and we need a bridge to the vaccine.

ADAM SHAPIRO: Howard, is anybody at the federal level or even in the business community-- the US Chamber of Commerce-- speaking with you or having that specific discussion? Because even an additional $250 billion may not be enough to get us past the next two months.

HOWARD SCHULTZ: Well, no, it's clearly not enough. This number has to have a T in front of it. This is a trillion dollar number in order to save these businesses. However, the cost to these businesses and to the country of going out of business-- a year from now, the economic carnage will be much, much greater for a longer period of time than the money it's going to cost to help them.

In terms of talking to other people, yes, I've talked to the governors of multiple states. I've talked to bankers of the leading banks in the country. And all of them agree with me, but we are not getting what we need from the federal government. And that is an understanding and a level of empathy and compassion that what they've done is great but it's not good enough. And we need to step in now and solve this problem.

JULIA LA ROCHE: Howard, it's Julia again. You were talking about economic carnage. We just saw in the last four weeks 22 million workers filed for unemployment insurance. And it's only going to continue if we don't find a way to have a backstop here. My question for you is what do you think happens to the social fabric of our country, what happens to wealth inequality, what happens to capitalism as we know it now?

HOWARD SCHULTZ: I think you just hit the real question of our time right now. You know, I think, in many ways, the crisis of capitalism has been camouflaged by the record number of profits and cash on the balance sheets of corporations, which even as we sit today is greater than it was post-9/11. The inequality issue is going to be so dramatic and so acute-- much, much greater than it has been in the last 10 years-- as a result of a post-corona life in America.

And that's why I think it's so vitally important that the people on the level of the banks, the corporations, government officials understand we're not just trying to solve an issue for businesses to remain open. We're also trying to maintain a level of employment for millions of people. And if millions of people are unemployed for a period of six months to a year, it is going to have a dramatic negative effect on the social fabric of the country-- exactly what you've just said.

So the rippling effect of not saving these small businesses is much, much greater than the economic issue alone, which is, unto itself, paramount to the country. The social fabric issues are even greater than what could happen if these businesses don't survive.

ADAM SHAPIRO: Howard, can you share with us-- and I realize you're the former CEO of Starbucks-- but the Starbucks at a corner near me actually, you can order on your phone, you can go to pick up, but they really don't come out-- you can't hang out inside. So what is Starbucks doing for its employees who are working providing coffee and some food for people who are going in, and how that model could be used, perhaps, by other businesses?

HOWARD SCHULTZ: Well, the interesting thing for Starbucks is we were managing through this in China months before the coronavirus became a pandemic in the US. And so we had three months of understanding in a way how to navigate through this. And we had 90% of our stores closed in China, which have now reopened. And so we took those best practices.

But the question is, first off, Starbucks is paying 100% of all its people in the company. No one has been furloughed, and no one has been let go. Everyone has their health insurance. In addition to that, the health and safety issues within our store, there is a new strict level of protocol in terms of what we're doing in terms of cleaning surfaces consistently, making sure everything is to a t in terms of the health and safety discipline. We're taking temperature of our employees and doing everything we possibly can to ensure the health and safety of both our people and our customers.

But I think the question going forward is what will life be like when the country reopens? And I think many people, many consumers are not going to feel safe and not feel comfortable. And every food and beverage establishment is going to have to establish a new mechanism to transform and refine their business in order to maintain the level of revenue and profit that it has in the past. It's going to be challenging for most businesses. I think Starbucks is already working on ways to do that in which we come out of this very whole.

JULIE HYMAN: Howard, it's Julie again. I want to ask a little bit about what you've been up to and what you may be up to when we're all out of quarantine. And that has to do with politics, because I know that a presidential run was something that you were considering. So I'm curious now-- do you support Joe Biden for president? Is there some way that you would want to be involved, if he does win, in the government? What are you thinking around politics these days?

HOWARD SCHULTZ: Well, you know, as a parent, as a citizen, and as a business person, I'm deeply, deeply concerned about where America stands today in the world and the current leadership within the White House. I will be supportive of Vice President Biden. And when the time comes, we'll do this in a public way.

JULIA LA ROCHE: Howard, Julia again. You and I have often talked about this idea of servant leadership. The mission of Starbucks when you started it was to nurture the human spirit. I guess this could go one of two ways-- we could either rally and become more civil, or this could be more divisive. If you could predict what happens, what do you think happens? Do you think the human spirit wins here?

HOWARD SCHULTZ: I've got great faith in the American people. And I've seen so many extraordinary, heart-warming events over the last few weeks in which people have stepped up to help others who are-- the Plate Fund is a perfect example of that. We've had people donate $5 and $10. We had people who got $500 and gave back $50 in order to do something for someone else.

I think we're going to rise to the occasion here. I do think it's-- a post-corona life for every other American is going to be different than it was before. March 2020 is going to live in infamy. But I've got great faith and confidence in the spirit and humanity of the American people. I do think that we need the kind of leadership in Washington that is compassionate, that is empathic, that is honest and transparent, and most importantly leaders who walk in the shoes of the American people and understand what a desperate, dire time this is for many, many Americans who potentially can't put food on their table, have housing insecurity. And this is not a time to kind of take a short term view. We literally need a bridge to the vaccine for millions of Americans and small businesses around the country.

ADAM SHAPIRO: Howard, as we begin to wrap up, I'm curious-- what advice do you have for each of us as individuals? There are stories in Manhattan and in New York City of people who are blessed to have resources so they continue to pay, for instance, a cleaning person even though they're not coming to the apartment to clean or they're going and bringing in the hair-cutter who's now on Craigslist to come cut the hair. Are there things that we can do individually to help others get through this financial crisis that you would recommend?

HOWARD SCHULTZ: Well, you know, I hate to give advice to other people, but what I would say is what I've said to friends of mine. And that is there's extraordinary levels of need right now for people and organizations that need funding and need support. When you look at these opportunities, I think it needs to hurt a little bit. In terms of whether or not you're writing a check or doing something that you don't need, this is a time for all of us to do everything we can for people who are not in the position that we're in. And I think we have to give of ourselves and it has to hurt a little bit, because people are in dire straits.

JULIA LA ROCHE: Howard, one last question before we let you go-- you and I when we talked about the Plate Fund, I think it's worth pointing out-- you've made sure that even the most vulnerable, even those who are undocumented in the restaurant industry are taken care of. And they don't get access to federal stimulus. How can we ensure those who are the most vulnerable don't fall through the cracks here during this crisis?

HOWARD SCHULTZ: Well, it's interesting because what we've learned during the Plate Fund is over 20% of the recipients of the Plate Fund are undocumented workers. Many of them did not want to kind of raise their hand for fear of being identified. So we went through the restaurant owners to work through them so that the anonymity and protection of their privacy. But you bring up a great point-- there are millions of people in the country who do not have access to federal assistance who are really in tough shape.

So anything that we do as a society has to take care of the most vulnerable and the most needy. And certainly the undocumented workers are a group of people who deserve our support. Thank you for bringing that up.