Greg Valliere, AGF Investments

The recent Paycheck Protection Program “pig-out” has complicated efforts to pass another stimulus package by early August, according to political analyst Greg Valliere, as the billions of dollars sent to “well-connected firms that didn’t need help” has “embarrassed Congress.”

On July 1, the House and Senate extended the PPP for small businesses until Aug. 8, with more than $130 billion still available.

Valliere, chief U.S. policy strategist of AGF Investments, said in his Wednesday morning briefing that while another stimulus bill will likely get done, “it’s not a slam-dunk, and it will take time — which will be in short supply when Congress comes back in the middle of this month before leaving again for most of August.”

On July 6, the Treasury Department and Small Business Administration released a much-anticipated report on the firms that have received PPP loans.

Lobbying firms as well as hedge funds — and even Kanye West — got money, “much of which is considered ‘forgivable loans,’” Valliere said. “And the banks that processed these translations got huge fees.”

Sen Marco Rubio, R-Fla., chairman of the Senate Committee on Small Business & Entrepreneurship, “is proposing PPP reforms in the next bill, which may only affect firms with 300 or fewer employees, and the firms must show that they have suffered significant losses,” according to Valliere.

Treasury Secretary Steven Mnuchin told CNBC’s “Squawk on the Street” Thursday morning that he’s had “very productive conversations” with Rubio, and they both plan to talk with Sen. Ben Cardin, D-Maryland, ranking member on the Small Business Committee, next week; “So there is already bipartisan work,” Mnuchin said. “I think any extension around the PPP is going to be much, much more targeted to the businesses that really need this money and the smaller businesses.”

As to unemployment insurance, “We’re going to make sure that people are incented to go back to jobs,” Mnuchin said. “I’ve heard stories of where companies are trying to get people back to work and they won’t come because the enhanced unemployment. But we’ll fix that and we’ll figure out an extension to it that works for companies and works for those people who will still be unemployed.”

Meanwhile, Rep. Jamie Raskin, D-Md., and 33 House members urged SBA Administrator Jovita Carranza and Treasury Secretary Steven Mnuchin in a Wednesday letter to immediately issue guidance clarifying that small-business owners who returned their PPP loans are able to reapply for the program given that the terms have been substantially improved by the recently adopted Paycheck Protection Program Flexibility Act.

“Numerous constituents have expressed concern that their lenders were unable to process their second loan application or were uncertain about whether they should because the first loan had been returned,” the lawmakers wrote.

Many small businesses that previously returned their disbursed loans “are now eager to benefit from the improved program,” the lawmakers stated. “Yet contrary to a statement from an SBA spokesperson that companies which have returned PPP loans would be able to reapply, many small businesses have been flatly rejected for a loan after resubmitting their materials. Lenders and SBA employees appear to be erring on the side of caution and informing small business owners that each company may only have one loan, even if the loan was promptly repaid in full.”

An SBA spokesperson told Politico’s Morning Money newsletter that companies that returned money can reapply for PPP loans as long as their original loan has been canceled in SBA’s system.

Stimulus Details ‘In Flux’

A new spike in COVID-19 cases “has convinced most of Congress — including Mitch McConnell — that another stimulus bill is necessary, but the details are still in flux,” Valliere said.

Lawmakers return next week, and will “have to move quickly to address the $600 in weekly unemployment benefits,” which expire at the end of July, Valliere said. Widely considered a disincentive for people to return to work, the souped-up unemployment benefit “probably will be lowered or replaced by a hiring bonus.”

What will a new package include? Senate Majority Leader Mitch McConnell, R-Ky., “is insistent on passing COVID-19 liability protection,” Valliere explained. “Aid to states seems mandatory. Another round of stimulus checks is increasingly likely. And the PPP program probably will get a little more money, with eligibility standards tightened dramatically. New infrastructure outlays are unlikely in this package.”

The price tag is also in flux, Valliere added, “with $1 trillion — McConnell’s goal — a likely floor. President Trump may seek more money in an effort to boost the economy ahead of the election; something around $1.5 trillion seems likely.”