Obama: Helping the Unemployed Will Help the Economy

(Dec. 2) -- Helping long-term unemployed Americans stay afloat isn't just a good idea, it's an economic necessity.

That's the argument the White House is making in a fight to get Republican support for an extension of unemployment insurance for people who have been unable to find work for half a year or longer.

Federal funding of state unemployment checks for people out of work 27 weeks, put in place during the financial crisis, expired Tuesday. And unless Congress passes an extension soon, about 2 million people will lose coverage this month and nearly 7 million will be cut off by November next year, according to a new report from the White House Council of Economic Advisers.

"That's not just a potential tragedy for those individual families. It could have a huge impact on your local economies," President Barack Obama said today during a meeting with newly elected state governors. "Because every economist of every stripe will tell you that unemployment insurance dollars are probably the ones that are most likely to be spent, most likely to be recirculated, most likely to help to boost small business and services all across your states, and they're going to have an effect on your sales revenue."

The CEA study estimates that as beneficiaries spent the additional unemployment aid for food, rent and other necessities, the extended benefits were responsible for creating or sustaining 800,000 jobs from 2008 through this past September, and that a failure to extend the benefits again could cost the country 600,000 jobs by the end of next year.

"If you're going to have millions of people just before the holidays losing their benefits and then multiple millions in the months that follow losing their benefits, the impact on consumer spending is significant," said Austan Goolsbee, the CEA chairman.

Congressional Democrats have been trying to get traction on an extension of unemployment insurance for months. But Republicans have resisted, insisting the country has higher economic priorities that include passage of a temporary operating budget that will keep the government going when the current emergency-funding measure expires Friday night and a solution for the Bush-era tax cuts set to expire at the end of the year.

Senate Republican leader Mitch McConnell has said he'll block all other business until the tax cuts are renewed and another temporary operating budget is passed.

Rep. John Boehner, set to become speaker of the House in January, has declined to answer direct questions about the unemployment insurance.

Asked this morning at a news conference if they could be part of a bigger legislative deal that includes an extension of the tax cuts, Boehner responded: "We'll see."

Obama, speaking with reporters before the governors meeting, said he hopes and expects it will be "part of a broader package."

House Democrats barely managed to pass a bill today extending the Bush tax cuts but not for households making more than $250,000 a year -- with no link to unemployment insurance. But the measure is one Republicans can easily defeat in the Senate.

And late this afternoon the White House released a statement from Obama, saying that "reports that we are near a deal in the tax cuts negotiations are inaccurate and premature."

The Labor Department is scheduled to release November's payroll and employment figures Friday. Economists expect the recent upturn in job creation to continue, but it's unlikely to reach a pace that can start reversing the loss of more than 8 million jobs during the financial crisis.

Last week, 436,000 people filed new claims for unemployment insurance with state authorities, according to the government's initial seasonally adjusted reckoning. Though that's an increase of about 26,000 from the week before, the less volatile four-week moving average showed another decrease, at 431,000.

But economists generally hold that the U.S. labor market must produce initial jobless claims of closer to 300,000 per week to be considered healthy.

Moreover, as of October, the economy wasn't even creating enough jobs to absorb new graduates and other new members of the work force. The number of people officially considered among the long-term unemployed was 6.2 million, and that's not counting the 2.6 million people who aren't working but also aren't numbered among the unemployed because they're no longer looking for work.

Some Republicans, including Rep. Mike Pence, the No. 3 Republican in the House, have said they'll vote for an extension of jobless insurance, but only if it is paid for by immediate cuts in other spending.

But Goolsbee argues that doing so would remove any benefit the broader economy would get from an extension.

"If you're talking about immediate impact, you would not want to be putting in and taking out the same amount of money at the same time," he said. "The net of that would be zero."