My friend Bob Litan, who is a senior fellow at the Brookings Institution, is worried about COVID-19 herd immunity. Specifically, Bob worries that the only way our population can reach the 60-70 percent immunity rate required to protect us all from the novel coronavirus is if some people are paid to take the shot. And Bob may be correct: a Gallup poll last month concluded that 35 percent of Americans would refuse to be vaccinated.

Uh-oh.

Bob thinks the way around this problem is to pay people, giving them an economic incentive to do the right thing. This got me thinking about the whole concept of economic incentives, which I generally think are a bad idea.

An incentive is a reward used to encourage a specific behavior. Incentives are used strictly to motivate people who can afford not to do what you ask — they are for people who have choices. Disadvantaged people aren’t generally viewed as needing incentives so they generally don’t get many. I’m 67 and need no incentive at all, for example, to accept the Social Security payment I get on the fourth Wednesday of every month. Old people, poor people, sick or disabled people aren’t generally viewed as needing incentives because we are just trying to survive.

What I don’t like about incentives is they cost money (sometimes a LOT of money — typically going to people who don’t actually need it) and they almost never achieve their stated goals.

For example, the U.S. Small Business Administration’s Paycheck Protection Program (PPP — a COVID-19-related loan program intended to keep the U.S. economy from cratering during the pandemic) ended last month with $140 BILLION in funds left over. Can this mean there were no small businesses remaining that needed to borrow money? Hell, no. It meant that $140+ billion in SBA loan applications were turned down because lenders did not perceive their incentives as big enough to justify the risk of approving the loan.

The big SBA lenders stopped lending long before the program ended. Having already served all their big customers the program was never intended to serve, plus all of their existing business customers, the banks either stopped accepting applications (Wells Fargo — MY business bank — did that) or they took applications then denied pretty much every small business that applied.

Apparently the incentive offered (primarily a fee for originating the loan) just wasn’t worth the effort or the perceived risk. Remember the loans weren’t 100 percent guaranteed, so there was some risk. There was also the additional effort of PPP forgiveness auditing. No wonder the banks were slow to get into this program until they had figured a way to game it and were so quick to get out of it once their game was exposed.

Where in all this lay civic duty? Evidently nowhere.

Where in all this lay the SBA opening-up a can of whoop-ass on the banks? Definitely nowhere.

Instead, the SBA eventually opened-up the PPP program to non-bank lenders including PayPal, Intuit, QuickBooks Capital, Square Capital, Kabbage, Veem, and Biz2Credit. These non-banks made about 200,000 loans out of five million — about four percent of the total.

This looks to me like a failure of economic incentives. Had the incentives worked, all the allocated money would have been loaned.

How could incentives be made better?

SBA lenders are paid a fee for originating loans to eligible small businesses — loans that are for the most part guaranteed by the full faith and credit of the U.S. government. This fee is the bank’s incentive and the risk they face is the 15 percent of the loan principal that is not guaranteed.

If you go back and read news coverage of the PPP program you’ll see that established SBA lenders were not very quick to start issuing loans. And when they did start lending, most banks limited their PPP loans to their existing business banking customers including many larger outfits that technically didn’t even qualify as small businesses.

Remember this was on top of another $500 billion lent to big businesses through another, generally opaque, government program.

The first tranche of PPP loans, more than $300 billion in all, was sucked-up in two weeks by borrowers who could have borrowed the same amount of money elsewhere. That’s against the basic tenants of the SBA, which according to the Small Business Act is the lender of last resort. In many SBA loan programs you can only borrow the money if you first prove that can’t get it anywhere else. But that wasn’t generally the case with that first $300 billion in PPP money, which argues pretty strongly, I’d say, that those particular lender incentives were wasted.

The whole idea, remember, was to boost the economy by stuffing it with cash. The economy would be doing better right now had that extra $140 billion been loaned. But the incentive evidently wasn’t enough.

What about the incentive to help the economy, to avoid recession and possible economic depression during a unique national crisis? That doesn’t seem to have had much effect on the lenders, damn them.

I’m trying to understand this behavior, because I didn’t like it in the Great Recession of 2009 and I don’t like it in 2020 — both cases where credit for small businesses was supposed to have been greatly expanded but wasn’t (or hasn’t been). Huge bailouts helped the banks, but the banks couldn’t be bothered to help small businesses. How can this be improved the next time around? Because we all know there will be a next time.

I think the answer is for Walmart to become one of those non-bank SBA lenders.

With more than $500 billion in sales, Walmart is a proxy for the US economy. Unlike any big bank, Walmart has customers, workers, and a vested economic interest in nearly every community in America. Also unlike those banks, Walmarts interests are, in this case, aligned with those of its would-be borrowers, who are also Walmart customers.

Say what you will about Walmart, but my Mom, who died in 2014, lived in Bentonville, AR, where Walmart is based. She bought her house in 1980 from Rob Walton, now chairman of the company. It wasn’t much of a house for a billionaire, but the Walmart CEO at the time, David Glass. lived (and still lives) next-door. My uncle JD (just JD — this was the south, remember) used to play poker with Walmart founder Sam Walton when Sam owned the Ben Franklin store in Newport, AR, where JD was the town’s only doctor. I believe I have a sense of Walmart and the Waltons.

And the Waltons, it turns out, know a thing or two about banking.

Walmart, like Apple, knows there are structural and legal limits to its growth that can only be broken by entering entirely new businesses. What if they became SBA lenders, threw-in $20 billion of their own money (probably enough to support $1 trillion in guaranteed loans) and made it the company’s goal to save America’s small businesses?

It would succeed. Pick up your check at Customer Service.

How ironic if Walmart, a company generally blamed for hurting small business in America, was the one to save it.

And here’s the thing: you know Walmart would kick all the other SBA lenders to the curb simply because in this scenario what’s good for American small businesses would be good for Walmart.

Their interests would be aligned and the incentives would finally be clear.