‘Free money’ can have unintended consequences for families, companies

Before I came to Las Cruces, I had the privilege of working for a foundation that came alongside a diverse, underinvested community to reclaim and transform a blighted property into something of great value to the community.

Through the creativity and vision of hundreds community residents and the resources of the foundation, teams of people transformed 20 acres of a long-abandoned factory into a vibrant place for arts, culture, food, meeting spaces and needed goods and services in the community. Part of the development, as guided by community input, was spaces for local entrepreneurs to bring restaurants into the area that reflected the diverse cultures of the community.

The foundation helped recruit and initially provide some support (financial and technical assistance) to local businesses owners to help them get through the initial launch period. And while the large chain grocery store in the retail center went on to become one of the highest grossing stores in the region, the first set of small businesses didn’t make it. As someone who had personally invested in their launches, it was devastating to see their dreams come to reality, only to end within just a couple of years.

What I learned through that experience is that you can’t grant your way into sustainability. A business rises or falls based on its ability to provide goods and services at fair market value, build demand and a consumer base, and run independently from other sources of “free” money.

When the pandemic hit and businesses were forced to close, a number of grant programs were launched to help them stay in business and attempt to keep their employees. I remembered the lessons learned in San Diego and wondered if our small businesses would be able to sustain operations after the grant money ran out.

As of January 2022, New Mexico has 25 percent fewer small businesses it had in January 2020, according to TracktheRecovery.org. While there are many reasons for those losses, many businesses did, in fact, go out of business.

But the impact of “free” money was felt just as profoundly by those people who lost their jobs during that time. Federal, state and local aid poured in to help keep families afloat during the closures, and New Mexico’s public assistance rolls swelled to more than 1 million people needing help. This money was also intended to help for a time, until people could get back on their feet and reclaim what was lost.

But here, too, the impact of “free” money has some negative consequences. Even before the pandemic, public assistance programs had the unintended consequences of hindering people’s earning power, due to asset and income limits. Those limits can prevent recipients from taking a raise, or a promotion, or working overtime due to the negative financial effect it will have on the funds they lose when their earning power increases. For example, a $3,000 a year raise can cost a family $8,000 in much needed benefits, which is the financial “cliff” that can prevent them from growing in wages and financial independence.

The pandemic forced even more people into this position, and for some, the cliffs became even higher. Thus, the unintended cost we see playing out in headlines now, where families have come to rely on the money that they were receiving, but those pots of money have run out.

So, as we think about real economic recovery from the pandemic, it’s vital that we place the financial stability of our families at the forefront of our thinking. Increasing earning power through high value, living-wage jobs or entrepreneurism that places no limits on an individual’s passion, potential and opportunity to create the life they envision.

We absolutely believe in the incredible potential of every member of our community to step into the vast number of opportunities for employment and entrepreneurship here. We know they can grow in earning and, when needed, in learning, to achieve incomes that make them financially secure for the long term.

Tracey Bryan is the president/CEO of The Bridge of Southern New Mexico. She can be reached at TraceyBryan@thebridgeofsnm.org.