Q&A: How Dean Phillips Tried To Fix PPP

July 7, 2020
In The News

Dean Phillips was elected to Congress representing Minnesota’s Third District less than two years ago. The consensus-focused businessman and philanthropic leader gained national attention in recent weeks when he co-authored the Paycheck Protection Flexibility Act, designed to fix problems in Congress’ Paycheck Protection Act which made it impossible for many small businesses to access. Few members of Congress are as keenly aware of the risks and opportunities in a pandemic economy as Phillips. TCB spoke to him about that and other issues from a conference room at the back of the Linden Hills location of Penny’s, the small coffee shop chain he co-founded in 2016.

Was it possible for a country of our size and geographic and ideological diversity to develop consensus on the pandemic, or was it a pipe dream?

We could have done it better and plans were in place to do it better. Something as simple as mask-wearing, that science indicates stops the spread . . . one person and one person only is responsible for the national division on masks, and that’s the president. It has political elements and the GOP tends to follow his lead. Conversely had he worn a mask, I think transmission would have been exponentially less. There’s no question that more thoughtful leadership would have resulted in better management and better preparation. The world is looking at us with dismay.

We’re sitting at Penny’s Coffee. What’s your role here now?

I’ve not been involved in the day to day, but I’ve had to become somewhat reengaged because of the massive economic disruption in the country.

How has Penny’s story been indicative of what small business is going through across the country?

We’re a business where people have risked capital. A business that is committed to taking care of its people and our community. And because of my principles, we did not secure a PPP loan. So more capital has been required.

Why?

It didn’t feel right to me, because so many in our community were struggling to get a loan.

You were closed for a period of time.

Yes. Now we’re doing takeaway. We’re not close to back to normal. It’s analogous to every small business in the country. Until they feel safe I don’t see people reemerging for some time.

If this is a multi-year process, as many believe it will be, is the federal government prepared to backstop small business indefinitely?

I believe so and if I have any influence, the answer is yes. Uncertainty is no friend of business. The flexibility act was a perfect example. We did not know how long it might go. Not all businesses are the same. I speak for many in Congress in saying if the small business ecosystem is at risk, it’s the government’s responsibility to keep it afloat. [Fed] Chairman Powell made it clear at a Financial Services Committee hearing that now is not the time to penny pinch. Despite the massive outlay of taxpayer money and debt being incurred, it will be a relatively small price to pay versus losing the backbone of the American economy.

When the PPP was enacted, there were businesses that couldn’t make use of it. How did you come to discover that?

It starts with my belief that representation begins with listening, rectifying problems, and, if necessary, creating new legislation. In this case I was engaging in Zoom meetings with chambers of commerce and small business owners and talking to the small businesses I support in the community, and every one was saying the same thing: The notion of the program was very helpful, but in practice it was deficient. And it was very clear what the deficiencies were, especially for certain categories of business, such as restaurants. And when I was speaking with my friend and colleague Chip Roy (R-Texas), he was hearing exactly the same thing 1000 miles away in Texas. It became clear the Treasury Department was not going to address it, so we wrote a bill.

The story of the Paycheck Protection Flexibility Act was as much about policy as it was about a Minnesota Democrat and a conservative Texas Republican recognizing a shared interest in doing better. A business with an “us” and “them” culture is bound to fail, but that’s how Congress typically operates. The most successful members of Congress are those who transcend party labels and listen and work with others. I don’t think this is an end. Chip Roy and I just communicated yesterday about a second round of legislation of PPP loans based on need, with a means-test, if you will. Because not all businesses have a need. Some are [pandemic] beneficiaries, even.

Two freshmen getting a bill to the floor is not an easy feat.

I’ve had a learning curve in Congress. I’ve done a lot of observing. When Chip and I recognized the need, getting it to the floor . . . . it’s analogous to having a wonderful product but not having access to distribution. There’s a graveyard filled with amazing products that underestimated the need for a great commercial strategy. So Chip and I collaborated on a commercial strategy. How do you market the bill to generate awareness? And how do you generate a distribution awareness? That opportunity arose when it was time to vote on the HEROES Act.

I signaled I had not decided how to vote, and Speaker Pelosi called me in and we had a 30-minute conversation where I was able to express my disappointment about too many bills that were too broad in their scope and that I had a bill with Chip Roy that addressed an acute need that could pass the House in remarkably bipartisan fashion. I implored that she give it a shot and she agreed. It is unusual for two freshmen to be afforded that opportunity. It’s very analogous to right now, [with] such massive disruption in our economy, it’s going to cause businesses to go under, but it presents opportunity for those who see new opportunity. While everyone was focused on one thing, we saw a different opportunity. Nothing has been more unifying in my time in Congress than this specific bill. It’s a metaphor for what is possible. It passed 417-1, which means I need to work a little harder next time.

We talked in very late 2018, as you prepared to start your term. Eighteen months in, is the partisanship and dysfunction in D.C. as bad as everybody makes it out to be?

It’s a tale of two cultures in Congress. You have the leadership culture and the rank-and-file culture. In the leadership, the answer is yes. Unfortunately, the culture is predicated on winning and messaging, and less on results. Most of the rank and file want to do better and build relationships.

I recognized I would have to be intentional about creating relationships. I joined the Problem Solvers Caucus—25 Democrats, 25 Republicans—we meet once a week for an hour, which is the best hour of my week, the most productive time I spend. I’m endeavoring to elevate that kind of interaction through the leadership ranks, because I’m disappointed in both parties.

But my sense is that a different president isn’t going to change the culture in Washington. Or am I missing something?

Trumpism is a cult of personality. Donald Trump is a reflection of people who are angry and disenfranchised and upset at two political parties fighting each other all the time. I don’t frankly consider him to embody Republican principles. I don’t think it is about an ideology. . . . We have the potential to find and elevate people who are here to connect us rather than divide us. It’s not a complicated endeavor.

Do people want a solutions-based government, or do they want to fight? I don’t ever remember seeing a time where people derive so much satisfaction by screaming into the void.

I think about that every day. The volume of one’s voice is not an indicator of the breadth of its acceptance. Twitter and Facebook do not represent the United States. It’s a small percentage of the loudest people. I find it quite remarkable that we are now a country focused on what separates people as opposed to what connects us. There is an opportunity and the pendulum will swing back and I plan to play a role in that. If we can bring more people to Washington for that purpose, we will succeed. What inspires me more than anything is young people, high school students [who are] engaged, aware, and active.

Is the two-party system capable of self-renewal or is a third party the only way to move a pragmatic, solutions-oriented approach to governance?

Well, if there was ever a need for that reinvention and ever an opportunity for it, that time is now. Time will tell if that opportunity exists between the Democratic and Republican parties. My business experience has always been about disrupting the two big brands and categories. And in this case the two big brands are absolutely ripe for disruption. If both parties can’t get their acts together and be more collaborative, that presents an opportunity for another way.

Based on your time in Congress what’s your sense of the business savvy in these halls?

The problem with Congress is based on the system that committee influence and leadership is achieved. It’s not based on knowledge or passion for a topic, it’s not a meritocracy. It’s based on tenure. My Republican colleagues and I are becoming unified in the idea we have to fix the process. We have to elevate those who want to work with each other. We’re having too many policies crafted by people without real experience in issue areas, which means that lobbyists become much more impactful on policy. The more diverse Congress is based on professional backgrounds, the more successful we’ll be.

Let’s talk for a minute about some of the societal strains we are dealing with this summer. Progressively minded leaders had an opportunity in the 1960s to make a dramatic break with historic racial injustice, but fundamentally did not succeed. How do we get it right this time?

As a nation we’re a teenager in relative terms. If we looked at it with open hearts and minds this is a remarkable time to grow as a country. It starts with listening. It starts with understanding that we mistook quiet for peace. That will not suffice moving forward. It is neither quiet right now, nor peaceful. We have an opportunity to divide ourselves or do something about it. My invitation to everybody is the same: Don’t be afraid to connect with those feeling pain and injustice. Be afraid not to. Increasingly our divisions politically are less about ideology and more about geography. People I represent in suburban districts have been relatively insulated from the challenges many face. I’m eager to be a part of [the solution-finding] and it is our job to invite more people to that conversation. If we fail, we will pay the price.