White House Warns of Severe Consequences if the Unemployment Benefits Extension is Killed

If Congress fails to extend unemployment benefits this would mean bad news both for the unemployed and for consumer spending this holiday season, a report released Thursday by the White House Council of Economic Advisers (CEA) said.

Unemployment benefits have a direct bearing on the economy, as they enable those collecting them to continue spending, which supports jobs that depend on consumers. That is especially the case during the holiday season, when Americans tend to spend more, the White House said.

"When (the jobless) lose the unemployment insurance, there's a very significant drop-off in the amount of consumption spending that they do," CEA Chairman Austan Goolsbee said during a conference call with reporters Thursday.

As a result of past extensions, unemployed individuals were able to continue to spend and contribute to the economy, the study said.

The report found that without previous rounds of extensions, the country would have had 800,000 fewer jobs as of September 2010. Failure to act now to extend benefits once more could cost the nation 600,000 jobs by the end of next year and nip the nascent economic recovery in the bud, Goolsbee said.

Goolsbee argued that Congress should consider the immediate economic benefits that he said an extension on unemployment insurance would bring.

"What will have the most immediate and important impact on the economy right now is clearly providing support for people who are going to maintain their consumption level," he said.

In December alone, 2 million Americans -- and nearly 7 million over the next year -- would also lose the temporary financial support that helps them make ends meet if Congress votes against the extension, the report said.

UNEMPLOYMENT INSURANCE AND THE DEFICIT

The call for an extension comes amid a drumbeat over cutting the nation's 1.3 trillion U.S. dollar deficit and a debate over what actions to take to boost the short-term economy without adding to that debt.

Those on unemployment compensation receive on average 300-400 U.S. dollars per month from state governments. Once that runs out, they can receive extended benefits paid by the federal government.

But another round of extensions -- there have been more than half a dozen since the economy took a nosedive two years ago -- is a point of contention in Congress at a time when the federal deficit is rising.

With that in mind, lawmakers are concerned about paying for the extensions, as the cost of extending them just until February would amount to 12 billion U.S. dollars.

WHAT WILL CONGRESS DO?

Some experts said lawmakers are unlikely to extend benefits, at least in the lame duck session, as the Congressional agenda is jam-packed with a myriad of issues.

The debate over jobless benefits has given rise to yet another debate: Some contend that benefits are a disincentive to find a job, although others say the amount received will do very little to help, say, a family of four with a mortgage, as their bills would easily outpace their weekly unemployment payments.

Others contend that the issue is highly politicized and that lawmakers are kicking it around like a political football at the expense of the jobless.

JOBS ARE SCARCE

Aside from the impact on consumer spending, extending the benefits also makes sense because the United States is still clawing its way out of the worst recession since the 1930s, the White House said.

"In an environment when you've got five times as many unemployed workers as there are job openings, it takes a long time to find a job," Goolsbee said. "In the past we have never not extended unemployment benefits in anything like the conditions that are prevailing today."

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