WASHINGTON — When restaurant industry executives gathered at the White House this month, Tilman J. Fertitta pleaded with President Trump to let his chains of high-end eateries gain access to a government loan program meant for small businesses.
Mr. Fertitta, the billionaire owner of the restaurant group Landry’s, told Mr. Trump it was unfair that he had to lay off 40,000 workers at his 600 restaurants only because they were employed by a larger corporation that was suddenly boxed out of the program amid public outrage over big companies getting bailouts. Mr. Trump turned to Treasury Secretary Steven Mnuchin, whose rule changes had excluded companies like Landry’s, which owns restaurants like Del Frisco’s Double Eagle Steakhouse and Morton’s Grille, to see if there was anything he could do to help.
Mr. Mnuchin, observing that the politically charged debate was taking place with cameras rolling, demurred. “We don’t need to have this in front of all of our friends back there,” he said.
The Trump administration’s carrying out of the largest economic bailout in American history has emerged as a political liability for the president, with businesses, banks and Democrats assailing the White House over its handling of a centerpiece program intended to help keep businesses and workers afloat during the virus-induced shutdown.
Funds have flowed to rich hoteliers, the Los Angeles Lakers and Planned Parenthood affiliates, sending Mr. Trump’s advisers scrambling to reclaim money and tighten the program’s terms. With more than 30 million Americans jobless and economists predicting that thousands of small businesses could shutter permanently, the Paycheck Protection Program’s troubles are shaping up as an opportunity for Democrats heading into the 2020 election.
Top Democrats, including the party’s presumptive presidential nominee, Joseph R. Biden Jr., have seized on examples of rich executives getting money ahead of small businesses through the program as indicative of corporate cronyism.
Last week, the Democratic National Committee and Democratic state parties in swing states held conference calls with reporters and other events highlighting stories of small-business owners who did not get approved for loans.
In Maine, four small businesses — an animation studio, a beauty salon, a Pilates gym, and a cafe and bookshop — all told their stories of frustrations and failures with the Paycheck Protection Program, prodded by the state Democratic Party chair.
In Georgia, the state party held a similar call, with the owners of a cafe and a nanny service both lamenting their inability to get funding from the program.
In Florida, Tom Perez, the chairman of the Democratic National Committee, held a virtual event with local business owners and elected officials to make the case that the use of the P.P.P. was hurting the Latino community. The shortcomings of the program, Mr. Perez promised, would become a central focus of the committee’s messaging for the year.
“These are the stories that we’re going to tell,” Mr. Perez said. “The stories of tragedy among small-business owners. The stories of misuse of resources to help Trump and his buddies. The story of a Latino community that is a lifeblood community in this state and in this country. We’re going to be going everywhere, and we’re going to make sure that come election time, people see this.”
The Trump administration has hailed the loan program, which was part of legislation that passed Congress with bipartisan support, as a major success. Mr. Mnuchin has claimed that the loans have been a lifeline that saved millions of jobs. To date, $511 billion in loans have been approved, with an average loan size of $116,000, according to the Small Business Administration.
Some Republican candidates are running their own ads embracing the effort. Senator Susan Collins, Republican of Maine, who is facing a tough re-election battle, has spent nearly $500,000 on ads that promote her role in “co-authoring” the program, according to data from Advertising Analytics, an ad tracking firm. And Senator Mitch McConnell, Republican of Kentucky and the majority leader, spent $175,000 on an ad featuring small-business owners and employees describing jobs and businesses that were “rescued” by Mr. McConnell’s efforts on the stimulus package.
But left-leaning groups have seized on the program’s stumbles and are spending heavily to get that message to voters. Priorities USA, one of the largest super PACs on the Democratic side, has been paying Facebook to promote certain news articles — a tactic known as “boosted news” — that highlight shortcomings of the program.
An ad from Priorities resurrected an article from Fox Business with the headline “Stimulus Intended to Help Coronavirus-Ravaged Small Businesses Instead Rewarding Hedge Funds, Brokerages.” Another highlighted an NBC News investigation into firms with deep connections to the Trump administration that received P.P.P. funding.
Pacronym, a progressive super PAC that focuses on digital advertising, began running a $1.5 million ad campaign in five swing states — Arizona, Michigan, North Carolina, Pennsylvania and Wisconsin — that focused on struggling small businesses.
For each state, the group created a 15-second ad featuring a supercut of local news broadcasts focusing on small businesses left high and dry interspersed with national cable news figures questioning the program. Each ad begins with text on the screen saying that each state’s “small businesses are struggling.”
“It’s so important that we counter the lies and misinformation that the president is going to spew about quote-unquote economic recovery and make sure voters know who is to blame for this economic crisis,” said Tara McGowan, the chief executive and founder of Pacronym.
Democrats and allied groups have been buoyed by polling from Navigator Research, which is overseen by leaders of several progressive organizations, that found a majority of Americans were “very concerned” that the loans were going to large corporations and businesses like the Los Angeles Lakers instead of small businesses.
The issue is already coming up on the virtual campaign trail. Mr. Biden has been raising Mr. Trump’s management of the stimulus money with growing frequency in television interviews and on social media. This month, Mr. Biden vowed that, if elected, he would appoint a new inspector general to investigate where the stimulus money went and refer any misdeeds or “corrupt giveaways” to the Justice Department for prosecution.
The Paycheck Protection Program, which provides forgivable loans to cover eight weeks of payroll and overhead costs to businesses with 500 or fewer employees, has benefited many small companies. More than four million loans have been approved and, according to the Federal Reserve’s most recent “Beige Book” report, the program has helped limit layoffs.
But the rollout has not gone smoothly, with technical glitches and delays hampering efforts to send money out the door and millions of dollars in loans approved for large companies, including those that are publicly traded and had other access to capital.
A report by S&P Global Ratings found that, in the first round of the program, seven out of 10 states that received the largest loan amounts had the lowest unemployment rates, while eight out of 10 states that got the smallest loan amounts had the highest unemployment rates. California businesses have been the biggest recipients of loan money during the two rounds of the program.
After it became public that big franchises, including Shake Shack and Ruth’s Chris Steak House, were getting loans, Mr. Mnuchin warned that firms with access to other capital should repay the loans or face criminal liability for lying on their applications. Last week, amid backlash from Republicans, the Small Business Administration sent letters to Planned Parenthood affiliates ordering them to return loan money because they were not supposed to be eligible to apply.
Lawmakers are working on a bipartisan fix to the program that would give businesses more time to use the money, more flexibility over how it can be used and greater protections for banks that executed the loans.
The House on Thursday approved a bill that would give companies more time and flexibility to use the money.
It remains unclear whether the program will be replenished when it runs out of funds for a second time, but it will most likely continue to put Mr. Trump and Republicans on the defensive.
Stephen Moore, the conservative economist who is an informal adviser to Mr. Trump, said that Republicans made a mistake in devising a program with insufficient transparency in which most of the loans turn into grants. That has given big companies an incentive to seek free money.
“That was a very foolish and expensive decision that has led to a lot of taxpayer rip-offs,” Mr. Moore said.