(Bloomberg) -- The surprise rebound on U.S. job markets is leading some Republicans to question the need for more pandemic stimulus, as Congress debates whether to renew the extra benefits it approved for unemployed Americans during the crisis.The payments of $600 a week, currently due to expire July 31, will be discussed at a hearing of the Senate Finance Committee on Tuesday. Republicans have argued that the need to juice the economy is receding, after 2.5 million jobs were created in May and the unemployment rate declined when it was expected to jump.
That data “underscores why Congress should take a thoughtful approach and not rush to pass expensive legislation paid for with more debt,” said Michael Zona, spokesman for committee chairman Chuck Grassley. President Donald Trump said last week he’ll ask Congress to pass more economic stimulus, including a payroll tax cut. The White House is looking to spend as much as $1 trillion, a figure that is said to have backing from Senate Majority Leader Mitch McConnell.
‘Going to Struggle’
A growing number of Senate Republicans like Pennsylvania’s Pat Toomey want to slam the brakes on stimulus, and give the roughly $3 trillion that Congress already allocated time to work its way through the economy.
That spending surge, coupled with a plunge in revenue as the economy shut down, has put the U.S. on track for its biggest budget deficits since World War II. The shortfall in the fiscal year through May probably widened to $1.9 trillion, more than double the 2019 figure, the Congressional Budget Office said Monday.But most economists say the recovery is still too fragile for government support to be withdrawn –- and there’s support for that view in GOP circles too.“This jobs report should not take the wind out of the sails of another stimulus bill,” said Gordon Gray, the director of fiscal policy at the right-leaning American Acton Forum and a former staffer to Ohio Senator Rob Portman. “There are people who are going to struggle for a long time.”Portman is pushing a plan that would redirect stimulus rather than cut it off: a $450-a-week return-to-work bonus. He says it would deliver “significant cost savings compared to the current money we’re spending.” Backers of the plan, including White House economists, also say it would remove disincentives to work created by the ramped-up jobless benefits – an argument that resonates with Republicans.
‘Real-World Consequences’
Democrats say the May jobs report is evidence that the extra payments didn’t stop Americans returning to work -– and point to still-elevated unemployment levels.“If millions of Americans who remain unemployed are suddenly unable to pay their bills, the economy will get worse, not better,” said Oregon Senator Ron Wyden, the No. 2 on the Finance Committee. He cited a June 4 analysis by the CBO that said not extending the weekly benefit would damp growth in the second half of this year.
The Democrat-controlled House of Representatives already voted to keep the jobless payments in place, as part of additional stimulus measures worth some $3 trillion. That bill has no prospect of getting through the GOP-run Senate, where serious negotiations on another stimulus bill aren’t expected to start until mid-July – just a couple of weeks before unemployment insurance will revert to pre-virus levels.There’ll be “real-world consequences” if Congress doesn’t take action before that July 31 deadline, said Mattie Duppler, a senior fellow at the National Taxpayers Union.“When those UI benefits run out, we could see households feel the financial impact of the lockdown,” she said. “Luckily, the president doesn’t seem to be persuaded that there shouldn’t be another stimulus package.”
©2020 Bloomberg L.P.