The Phase 4 “stimulus” is starting to take shape with the announcement yesterday of the Senate Republicans' plan.
The fundamental flaw of this document is that it excludes the most important pro-growth measure: the payroll tax suspension for the rest of the year for 150 million workers and nearly 30 million small businesses and self-employed business owners.
This would create up to 3 million jobs over the next six months and give a pay raise of 7.5 percent for every nurse, teacher, home care worker, construction worker, and police officer in America – the heroes of our economy. President Trump should not sign any final product without the payroll tax cut.
But notwithstanding that fundament flow, the plan from Senate Majority Leader Mitch McConnell...isn't half bad. There are several really positive ideas and we can take solace in the fact that the price tag is "only" $1 trillion. (Speaker Nancy Pelosi’s House-passed monstrosity costs and borrows $3 trillion!)
Here's our quick summary of the Senate GOP plan’s major planks:
1. Another round of $1,200 stimulus checks.
Grade: Thumbs down. Dropping free money into people's pockets is no road to prosperity. This isn’t a stimulus, it is a redistribution of money from producers to non-producers.
2. More funding for Paycheck Protection Program loans.
Grade: We will see. The feds must make sure that these are LOANS to be repaid to taxpayers, not grants – i.e., free money.
3. Unemployment insurance compensation of $200 per week (down from $600 today) until states create their own plans of 70 percent (of paycheck) UI compensation in the future
Grade: Thumbs up. It is ESSENTIAL that the $600 a week bonus unemployment benefits end on July 31 as scheduled. The Congressional Budget Office finds five out of six workers make more money staying unemployed than going back to work – and in some cases, they get twice as much for not working.
An analysis by Casey Mulligan of the University of Chicago finds that keeping those payments would reduce employment by almost 10 million jobs by the end of the year. There is NO jobs recovery if this policy continues. No backing down.
4. Liability protections for schools, businesses, churches, etc.
Grade: Thumbs up. Businesses need to be protected from trial lawyer lawsuits against an employer or a hospital or nursing home anytime someone gets sick. An analysis by Committee to Unleash Prosperity finds that without this liability shield, at least 500,000 jobs will be lost.
5. $100 billion to an education fund to help schools and universities safely reopen.
Grade: Thumbs down. Since most public schools aren't reopening, why do they need $100 billion? Any federal funding for schools this year and next should only be for schools that are open FULLTIME.
6. Education Freedom grants to cover scholarships for private schools and payments to parents for homeschooling.
Grade: Thumbs up. I feel like I’ve died and gone to heaven. This will give potentially millions of parents, mostly with low incomes, a chance to send their kids to good schools this fall. Distance learning is a failure for at least half of the bottom half of children; they need in-class instruction. Trump is right: School choice is the single most important civil rights issue of our time. If teachers union members won’t teach, let’s find people who will teach our kids.
7. 100% deductibility for business meals and entertainment.
Grade: Thumbs down. What would a stimulus bill be without a few special interest giveaways to the corporate lobbyists? Come on!
All in all, a good bill. The problem is it will get much worse as Trump and McConnell begin to negotiate with Pelosi. There is not one single feature of the Pelosi bill that is positive for the economy.
Wall Street is betting the final price tag could exceed $2 trillion – and bring government spending to close to 50 percent of GDP. If this is about stimulating the economy this fall, Republicans should remember: No bill is much better than a bad bill.
Stephen Moore is an economist at FreedomWorks and a member of President Trump’s economic recovery task force.