NEW YORK (CNNMoney.com) - Lawmakers come back to work Monday facing a tough decision: Whether it's more important to spend money to keep the economic recovery going or to watch their pennies.
One camp, made up mostly of Democrats, is arguing that Congress must spend to help cash-strapped states and people who are hurting from the downturn.
The other side - mainly Republicans but also a few fiscally conservative Democrats - says that adding to the nation's deficit poses an even bigger economic problem. They don't mind helping the unemployed and the states, as long as the measures are paid for.
Lawmakers don't have much time to argue. They'll be in session for a month before leaving for the extended August recess. And when they return after Labor Day, they'll be wrapped up in the November elections and likely will get little done.
There are three pressing issues that lawmakers will wrestle with in July.
New York (CNNMoney.com) - The job market and economy need a serious jumpstart, but the stimulus program likely won't be able to do it.
This summer will be the peak of the $787 billion stimulus program in terms of creating jobs and pumping money into the economy. In fact, the Obama administration is calling it the Summer of Recovery because more than 30,000 miles of highways are being improved, more than 2,800 water projects have been started and 120,000 homes will be weatherized.
After that, it will be a downhill slide for stimulus even as the economy is expected to continue sputtering.
New York (CNNMoney.com) – Nearly a million people have lost their unemployment benefits because the Senate failed for the third time Thursday to extend the deadline to file for this safety net.
Hoping to overcome deficit concerns, the Senate trimmed down the bill yet again on Wednesday night so that it would only increase the deficit by $33.3 billion over 10 years, instead of $55.1 billion. The main changes were to scale back additional Medicaid funding for the states and to reallocate some stimulus and Defense Department spending.
The legislation failed by a 57-41 vote.
The bill will now be pulled, according to two Democratic leadership aides. This leaves many groups in flux, including the jobless who have lost their safety net, companies who are waiting to learn what tax breaks are extended, and governors who were counting on the additional funds to balance their budgets.
The grab-bag legislation pushes back the deadline to file for federal unemployment benefits until the end of November, renews expired tax provisions, lengthens a small business lending program and adds to infrastructure investments.
New York (CNNMoney.com) – More troubled homeowners have fallen out of trial mortgage modifications than have received long-term help, a new government report shows.
But nearly half of these borrowers received alternate help, while only 7% have fallen into foreclosure.
The administration's signature housing-rescue plan, Home Affordable Modification Program, saw a surge of people leave the initiative in May. More than 152,000 have had their trial adjustments cancelled since the program started, mainly because they could not document their income or because they earned too much to qualify for assistance, officials said.
Nearly 430,000 borrowers have had their trials cancelled - more than one-third of the total started. Servicers place troubled borrowers in trial modifications for several months to verify their income and see whether they can make the lowered payments.
New York (CNNMoney.com) – Seeking to appease deficit hawks, Senate Democrats scaled back unemployment benefits and Medicare physician reimbursement measures on Wednesday.
The revised jobs bill eliminates a $25 weekly supplement for the jobless that had been part of the last year's stimulus act. Those currently receiving the supplement in their unemployment benefits check will continue to do so until they exhaust their extended benefits, or until the week of Dec. 7, whichever comes first. That cut will reduce the bill's cost by $5.8 billion over the next decade.
The new version of the bill would also freeze a 21% cut to Medicare physician reimbursement rates only through November, instead of through 2011. This will reduce the bill's size by $16.4 billion over 10 years.
The legislation, which has been stuck in the Senate for more than a week, originally came in at about $140 billion and would have added about $78.7 billion to the deficit. The overall impact of the revised bill on the deficit has not yet been determined.
New York (CNNMoney.com) - The federal government could have pressed the private sector to help rescue AIG when the company was on the verge of collapse in September 2008, a government watchdog has found. Instead, it let Wall Street off easy.
The government's $182 billion bailout of the global insurer has left taxpayers holding the bag, while ensuring that all of AIG's creditors and business partners are paid in full, said a Congressional Oversight Panel report released Thursday.
The oversight panel, which is charged with monitoring the government's use of Troubled Asset Relief Program funds, criticized the Federal Reserve and Treasury Department for repeatedly saying they had to choose between letting the world's largest insurer fail or
The government chose not to push major lenders to privately bail out AIG or propose a rescue that combined public and private funds. Nor did it require AIG to negotiate with its business partners, or counterparties, as a condition of its rescue. Since AIG's counterparties emerged unscathed, sophisticated investors who participate in the risky derivatives market now think that taxpayers will come to their rescue as well, the report said.
"The government distorted the marketplace by transforming highly risky derivative bets into fully guaranteed transactions, with the American taxpayer standing as guarantor," the panel wrote.
New York (CNNMoney.com) - Unemployed? Owe more on your mortgage than your home is worth? Your state might one day pay your mortgage.
Giving people free money to cover their home loans is just one of the radical ways that four states - Florida, Michigan, California and Arizona - plan to use $1.4 billion the Obama administration is sending their way to help the unemployed and underwater avoid foreclosure.
Many consumer advocates have said the government should help cover the payments of these troubled homeowners, lest the mortgage crisis continue spinning out of control and dragging down everyone's property values. But other housing experts warn that paying off loans creates a moral hazard and could actually dissuade people from looking for work.
Innovative programs, however, are exactly what the administration was hoping for when it unveiled the Hardest Hit Fund initiative in February. Officials are looking to help the unemployed and underwater, who are now at the heart of the crisis. Despite the administration's best efforts to stabilize the market, home prices are still sliding and foreclosure filings are at record highs.
New York (CNNMoney.com) - Freddie Mac on Wednesday requested another $10.6 billion handout from the federal government.
The housing finance company, which reported an $8 billion quarterly loss, was put into conservatorship by the government during the height of the financial panic in September 2008 along with its twin Fannie Mae.
Freddie has already received $50.7 billion from the Treasury Department. Fannie Mae has so far gotten $76.2 billion.
Since the housing collapse began in 2008, Freddie and Fannie have been propping up the mortgage market. The Obama administration, which has used the companies to support its foreclosure prevention efforts, is currently examining the future structure of the firms.
New York (CNNMoney.com) - The Senate voted Thursday to push back the deadline to file for extended unemployment benefits until June 2.
The $18 billion measure now returns to the House for a final vote, which is scheduled for later Thursday.
More than 200,000 jobless Americans were expected to stop receiving benefits last week after lawmakers let the April 5 deadline pass. Checks would be retroactive to that date.
New York (CNNMoney.com) - Under fire to do more to stop the foreclosure crisis, the Obama administration announced new steps on Friday to help the unemployed and those who are "underwater" with a bigger mortgage than their home is worth.
For eligible unemployed borrowers, the effort would require loan servicers to reduce monthly mortgage payments to 31% or less of income - and even suspend them entirely, an administration official said. The forbearance assistance would last up to six months, after which the borrower would be evaluated for a loan modification.
An administration official declined to comment whether interest or fees would be charged during the forbearance period.