Kevin O’Leary told CNBC on Tuesday the U.S. government should not establish more relief programs for businesses impacted by the coronavirus and instead allow market forces decide which companies survive.
“As a result of the pandemic and people’s changes in purchase behavior, there is a new America emerging and the only way to feel that out is let the market do it,” the “Shark Tank” investor said on “Squawk Box.” ”I don’t want another $2 trillion poured into the economy and having politicians decide who the winners and losers are.”
Some proponents of coronavirus aid to companies say it is required because government mandates — while designed to slow transmission of the virus — forced them to shut down, directly leading to negative impacts on their business.
O’Leary, who has investments in numerous businesses through the TV show, said he had initially been supportive of government aid to businesses such as the Paycheck Protection Program. Established as part of the history $2.2 trillion CARES Act in March, the program offered small businesses loans that could become grants if they were used to keep employees on the payroll and certain other expenses.
“I made sure that almost 80% of my companies went through the process of getting these loans, but I know now — and it’s a reality — that they’re all not going to make it,” O’Leary said. “Why do I want to pour government money, my money as a taxpayer, into businesses that are not going to survive? And the only way to do that is to let ‘Mr. Market’ do its work.”
O’Leary’s comments Tuesday come as lawmakers in Washington consider additional coronavirus relief legislation. Key elements of earlier aid packages, such as a federal $600-per-week supplement to state unemployment insurance, are set to expire in the coming days.
Other areas of focus include whether to provide aid to state and local governments, which saw steep declines in tax revenue as a result of the pandemic, and assistance for schools. Another round of stimulus checks to Americans also is on the table.
House Minority Leader Kevin McCarthy, R-Calif., told CNBC on Tuesday that he expects Congress to approve the bill “probably in the first week of August.”
Central to O’Leary’s argument against aid to businesses is a belief that the American economy will be fundamentally changed as a result of the coronavirus pandemic. At its core, it will be an economy relying much more on online sales and digital transformation, he contended.
“I’ve got 20% of my portfolio that is really hurting, and I actually don’t want the government to prop up zombie companies anymore. Stop doing that,” O’Leary said. “If a company has to die because the world has changed permanently, let it die and let something else replace it.”
If a company has to die because the world has changed permanently, let it die and let something else replace it.
Kevin O’Leary
‘Shark Tank’ investor
“Those good employees will find work, as they are in the wine industry,” added O’Leary, who founded a wine company. He said that the wine industry encapsulates the benefits of the digital transformation ushered in as a result of the pandemic.
“Think of the restaurants, the bars, the cruise ships, the airlines. The majority of wine was consumed in the tourism industry, and yet people’s propensity to drink wine hasn’t changed at all. The entire industry had to pivot, to figure out a way to sell it directly to customers,” O’Leary said.
That pivot has let to “thousands of people” being hired across the wine industry to allow for more online sales, including web designers and videographers, he said. It also means buying licenses for the software needed to do so, he added.
“The industry is figuring out a way to survive, and it’s a digital pivot. It’s happening in all my businesses,” he said. “Yes, there will be permanent impairment to restaurants and entertainment and travel industries, but at the same time there’s a new digital America emerging.”
Disclosure: CNBC owns the exclusive off-network cable rights to ″Shark Tank,” on which Kevin O’Leary is a co-host.