Congress shouldn’t make cutting the federal deficit a greater priority than creating jobs until the U.S. unemployment rate falls to 9 percent or lower for at least half a year, the second-ranking Senate Democrat said in an interview.
“If we have two or three quarters of 9 percent or less” then Congress can “breathe a sigh of relief” and “move forward on what we need to do on this deficit,” Senate Democratic Whip Dick Durbin said yesterday in an interview at Bloomberg headquarters in New York.
A 9 percent unemployment rate is “their idea of success,” Senate Republican leader Mitch McConnell responded today in a Senate floor speech. “Our idea of success is to get businesses hiring again.”
Durbin, of Illinois, said he didn’t have a timetable for when economic factors, including job-growth measures passed by Congress, would push unemployment down from the current 9.6 percent rate to less than 9 percent.
The House plans to vote this week on Senate-passed legislation to create a $30 billion loan program to spur small-business lending by community banks. President Barack Obama has also proposed new tax breaks for businesses, such as a permanent extension of the tax credit for research and development.
The National Bureau of Economic Research said yesterday the worst U.S. recession since the Great Depression ended in June 2009.
Policy makers in Congress and the Obama administration should use joblessness as one of the “indicators of when this recession is truly over,” and “9 percent may be the standard,” Durbin said. “We better take care not to hit the deficit brake too soon, or we are going to find ourselves going into a second trough in this recession.”
The U.S. unemployment rate won’t drop below 9 percent until 2012, the year Obama must stand for re-election, according to a Sept. 1-8 Bloomberg survey of 61 economists. The average jobless rate prediction for 2011 is 9.2 percent and 8.3 percent in 2012.
Durbin predicted the Senate will vote on Obama’s proposal to extend Bush-era tax cuts for middle-class taxpayers before Congress adjourns early next month to campaign for the November elections.
Obama has proposed extending the tax cuts for household incomes up to $250,000 and individual incomes up to $200,000 and letting the 2001 and 2003 tax cuts for about 3 percent of Americans in higher income brackets expire on Dec. 31.
Durbin accused McConnell of Kentucky of fiscal recklessness for advocating a permanent extension of the tax cuts for all income levels.
“How could he credibly stand up and even refer to our deficit problem after introducing” the tax extension, Durbin said.
The Office of Management and Budget has estimated it would cost $680 billion over a decade to extend current rates for the upper-bracket taxpayers.
Durbin said McConnell’s plan, and proposals to temporarily extend the tax cuts for top earners, won’t gain the 60 Senate votes needed to pass major legislation. Only Obama’s plan would get enough support to pass the Senate, the senator said.
“Democrats predicted that unemployment wouldn’t rise above 8 percent if the stimulus became law -- we know how that turned out,” McConnell said. With the unemployment rate near 10 percent and “an additional trillion dollars in debt,” McConnell said that “Americans’ confidence in the administration’s economic arguments never recovered.”
Durbin said he doesn’t expect Democratic losses in the House and Senate this November to necessarily be worse than in other midterm elections, when the president’s party typically loses more than 20 House seats.
With some exceptions, off-year elections “are never good for an incumbent president” and “this one is not likely to be good” for Democrats, he said.
Still, Durbin said, “Republicans have not been able to close the deal” because they haven’t spelled out “a credible alternative to the current unhappy situation.”