Businesses engaged in political and lobbying activities say they are in dire need of emergency funds amid the economic downturn.
WASHINGTON (CN) — Political consultants and lobbyists suing for relief through a program meant to ease the economic blow dealt by Covid-19 assured a federal judge on Monday that they would use the emergency funds to keep the lights on, not to peddle politics.
The American Association of Political Consultants sued the Trump administration last week for access to loans through the Paycheck Protection Program, passed as part of the $2.2 trillion CARES Act, arguing denying the funds curtails freedom of speech.
But federal law prohibits the Small Business Administration from subsidizing businesses primarily engaged in political or lobbying activities.
During a teleconference hearing Monday afternoon, the government argued that because Congress designed the loan program with forgiveness of up to the full amount borrowed, the money is effectively a subsidy.
“That delta between market terms and the terms of these loans is exactly the kind of economic benefit that transforms these into subsidies,” Justice Department attorney David Morrell said.
Pressing the assurance of ample loan forgiveness, the government attorney urged U.S. District Judge Royce Lamberth to deny the plaintiff’s motion for a preliminary injunction to block what consultants and lobbyists claim is a “content-based speech ban” that violates the First Amendment.
But Jason Torchinsky, with Holtzman Vogel, argued his clients are in dire need of the funds amid the severe economic downturn triggered by the government ordering businesses to close and citizens to shelter in place.
The attorney dismissed the Justice Department’s contention that the rule blocking the Small Business Administration from funding political consulting and lobbying firms has not been effectively challenged in almost 25 years.
Torchinsky said the rule took his clients by surprise, slipped in just hours before midnight on April 3 when the Paycheck Protection Program launched. The lawsuit filed April 15 in Washington federal court notes that the relief program was left open to faith-based organization, but not the political consultants and lobbyists suing for access to the small business assistance.
Reminding the judge that Congress defined the emergency money as loans, Torchinsky sought to hammer the point home: “They’re still a loan. You still have to go to a bank. You still have to submit an application. You still owe the bank interest on that money. Now granted it may be on nicely favorable terms but it’s still a loan. It still has to be paid back.”
But Lamberth expressed skepticism over the soundness of the plaintiff’s argument, questioning how the repayment process will play out.
“Well that’s not totally accurate because they’re also saying that most if not all of the loans are going to be forgiven, right?” the Ronald Reagan appointee asked.
Torchinsky responded that the nature of forgiveness through the loan program remains unclear.
“There’s an opportunity for forgiveness but there’s no guarantee of forgiveness for anybody,” the attorney argued.
Stressing that the political consultants and lobbyists desperately require the government relief to make payroll, Torchinsky repeatedly assured the judge the federal funds would not be applied to airing commercials or running advertisements.
“That’s not the intention here. The whole reason we are in this situation is the near shutdown of economic activity caused by the government,” Torchinsky said.
But the argument appeared a hard sell for Lamberth, who promised to issue a decision on whether to grant the preliminary injunction as early as Tuesday.
Met with high demand, the Paycheck Protection Program last week exhausted the $350 billion appropriated by Congress. Treasury Secretary Steve Mnuchin, backed by Republicans, has demanded Congress pass another $250 billion to continue doling out low-interest loans to small businesses.
But Democrats rejected the request, arguing the higher priority is funding hospitals and state and local government responding to the pandemic. Negotiations are underway to pass another massive relief package this week, expected to include an estimated $310 billion in new funding for the Paycheck Protection Program, as well as $75 billion for hospitals.