White House Says Extending Jobless Benefits Crucial for Economy

The Obama administration pressed the case for Congress to renew extended unemployment benefits with a series of briefings and a report projecting expiration of the program would cost almost 600,000 jobs over the next year.

The White House Council of Economic Advisers report released today also estimates that gross domestic product would be 0.6 percent lower by December 2011 if the extended benefits expire. The report used as a basis of comparison a year-long extension of benefits.

Because extended unemployment benefits provide income to jobless Americans, it stimulates consumer spending, which accounts for about 70 percent of the U.S. economy.

Unemployment insurance “is an extremely effective form of support for the economy relative to other government programs,” the White House report says.

In a replay of a dispute earlier this year, lawmakers are deadlocked over how to finance an extension of aid to the long-term jobless. Democrats earlier this week offered to extend benefits for a year, with the $56 billion cost financed with borrowed money. Republicans demanded the extension be offset with savings elsewhere in the government’s budget.

Without an extension, more than 2 million Americans will lose the temporary support this month, the report says, citing Labor Department data.

Reports today showing chain-store sales rose the most in eight months during November and sales of U.S. houses unexpectedly jumped a record 10 percent in October added to evidence consumers are opening their wallets. The reports sent stocks up for a second day.

Tax Cut Debate

The debate over the extension is spilling over into the wrangling between Democrats and Republicans over extending tax cuts that are set to expire at the end of the year.

Some Democrats, including Senator Dick Durbin of Illinois, said an extension of unemployment aid should be included as part of any deal on the tax cuts, which were enacted during the administration of President George W. Bush.

Since December 2007 -- the start of the worst U.S. recession since the Great Depression -- Congress has extended the total amount of aid three times so that the unemployed could receive up to 99 weeks of aid averaging $300 per week. The government spent about $160 billion on unemployment benefits in the fiscal year that ended Sept 30, or about what it cost to run the wars in Iraq and Afghanistan.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE