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Democrats Press Obama for Stimulus in Debt Deal After Jobs Data

Unemployment Puts Pressure on Fed to Buy Bonds
Job seekers fill out applications and other related paperwork at a job fair in Chicago. Photographer: Tim Boyle/Bloomberg

Democrats pressed for some form of economic stimulus in the debt deal President Barack Obama is negotiating with Republicans following a U.S. Labor Department report yesterday showing job growth slowing.

Senator Charles Schumer of New York, the chamber’s third-ranking Democrat, called for an “immediate jolt” to the economy by extending and enlarging a one-year payroll-tax cut that’s set to expire Dec. 31. He asked for action “as quickly as possible by including it in the final debt-limit agreement.”

Jared Bernstein, until recently Vice President Joe Biden’s chief economic adviser, predicted the White House would step up efforts to include in the debt deal additional infrastructure spending or a new temporary payroll tax reduction.

In addition to continuing a 2 percentage-point break in the employee payroll tax, the White House may push for an equal cut in the employers’ part of the levy, according to a Democratic official.

“It would be a mistake for them not to ratchet up the urgency on the jobs side, given the labor market really appears to be in a stall,” said Bernstein, now a senior fellow at the Center for Budget and Policy Priorities in Washington. “It’s not something you can ignore.”

The Labor Department reported the unemployment rate in June unexpectedly climbed to 9.2 percent, the highest this year. Employers added 18,000 jobs, the weakest growth since September 2010. Payroll growth for May also was revised downward, to 25,000.

Jobs and Debt

When Obama and congressional leaders meet tomorrow for negotiations on deficit reduction, the jobs numbers will increase pressure on both sides to reach a deal that can be presented as bold, said Dan Schnur, communications director for Republican John McCain’s 2000 presidential campaign.

“Even though the president gets a disproportionate amount of the blame for a bad economy, every elected official in both parties takes a share of the heat,” said Schnur, now director of the Jesse M. Unruh Institute of Politics at the University of Southern California. “If you’re a vulnerable Republican in a swing district, you have just as much incentive as the president to push your party leaders for a deal.”

Obama, in a statement delivered in the White House Rose Garden, said the employment report highlighted the “big hole to fill” in replacing jobs lost during the discussion.

He said an agreement on raising the debt limit and cutting deficits would “give our businesses the certainty they will need to invest in creating new jobs.”

‘Right Now’

Obama also promoted the administration’s agenda of measures to stimulate employment, urging Congress to act “right now” to extend the temporary reduction in the employee part of the payroll tax, expand funding for infrastructure projects, approve pending free-trade agreements and pass a measure to streamline patent procedures.

Republican leaders also stressed familiar positions in their responses to the jobs report, with House Speaker John Boehner of Ohio reiterating the party’s opposition to tax increases in a deficit deal.

“Legislation that raises taxes on small-business job creators, fails to cut spending by a larger amount than a debt limit hike, or fails to restrain future spending will only make things worse -- and won’t pass the House,” Boehner said in a statement.

Representative John Kline, a Minnesota Republican, said there are “no discussions” in his party about extending the payroll tax cut.

“I don’t think there is any appetite for it,” said Kline, who heads the House Education and the Workforce Committee.

‘Pro-Growth Policies’

Republican presidential candidate Mitt Romney said the “abysmal jobs report confirms what we all know -- that President Obama has failed to get this economy moving again.”

Former Utah Governor Jon Huntsman, also a Republican presidential candidate, said “extremely anemic job creation” demonstrates “we need free-market, pro-growth policies to spark a wave of job growth.”

The jobs report underscores the challenging economic environment Obama confronts for his re-election campaign next year.

Ronald Reagan, who faced an unemployment rate of 7.2 percent on Election Day in 1984, is the only U.S. president since World War II to win re-election with a jobless rate above 6 percent.

The climbing unemployment rate in recent months, up from 8.8 percent in March, will make it harder for Obama to persuade voters that the country is moving in the right direction.

“Voters already feel like the economy is stuck in the mud,” Schnur said. “Every month that we see a jobs report like this one reinforces the electorate’s sense that we’re not making progress, and that becomes gradually harder to reverse.”

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