Alayna Treene and I write: As lawmakers turn their attention to another coronavirus stimulus package, Republicans and Democrats each say they’ve learned many lessons from the $2 trillion CARES Act. The problem is, they can’t agree on what those lessons were.
Why it matters: With just an 11-day window in late July to act, and without the market free-fall of March to motivate them, Congress may choke on a compromise package that many economists see as necessary to keep the economy upright.
Between the lines: Because the House and Senate have alternating recess schedules, Congress will have to reach a deal on the phase 4 package in the small window between July 20–31.
- That's the time period between when they return from their respective recesses and when temporarily increased unemployment payments to more than 33 million Americans will expire.
What we're hearing: "Regardless of your politics, the enhanced unemployment benefits expire at the end of July and there’s still too many unemployed," Societe Generale U.S. chief economist Stephen Gallagher tells Axios.
- "The government is just obligated to continue to offer more support."
The catch: One big battle between Democrats and Republicans is over the reason unemployment has remained so high.
- GOP lawmakers argue that enhanced jobless benefits were too generous. "A lot of people have sort of rationally said, 'I prefer to keep getting the [unemployment] benefit for as long as I can because I'm making 100% or 150% or 200% of what I made at work,'" a Republican aide familiar with the stimulus talks tells Axios.
- Democrats contend that the economy was so badly damaged that workers don't have jobs to go back to and without the increased $600 a week payout from unemployment insurance will face poverty and possibly homelessness.
What went wrong: The Paycheck Protection Program, which "spent vastly more money than the number of jobs it saved," according to a new report from NBER, has more than $125 billion in funds remaining.
- Business owners complained that the restrictions were overly burdensome, and data show the funds largely did not go to the states, industries and communities that most needed the money.
- Additionally, more than 90% of the government's $500 billion loan program for larger companies remains untapped.
What's next: Republicans have been asserting for months that the government must evaluate both the effectiveness of the CARES Act and the economic impact of reopening before passing another large stimulus bill.
- On Friday, Senate Majority Leader Mitch McConnell reiterated this position: "In July, we’ll take a snapshot of where the country stands, see how the jobs are coming back, see where we think we are."
- McConnell also made clear that the HEROES Act is a non-starter. Instead, he said any sort of stimulus package with a shot of passing would be drafted in his office, adding that those talks won't begin in earnest for another few weeks.
The problem with this plan, as one senior Senate Democratic aide put it, is "they’re missing the cliffs that are coming up" with the nationwide moratorium on evictions ending July 25 and state and local governments facing deadlines to produce balanced budgets.