Recovery risked if jobless lose aid: White House

WASHINGTON Thu Dec 2, 2010 3:59pm EST

Men look over jobs listings while searching for employment at a jobs center in San Francisco, California February 4, 2010. REUTERS/Robert Galbraith

Men look over jobs listings while searching for employment at a jobs center in San Francisco, California February 4, 2010.

Credit: Reuters/Robert Galbraith

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WASHINGTON (Reuters) - President Barack Obama said Thursday that failing to extend unemployment aid would be a tragedy for millions of Americans and could hurt the economy, stepping up pressure on Congress to act.

"If we don't do something, seven million people could lose their unemployment insurance," he told a meeting of newly elected state governors. "That's not just a potential tragedy for those individual families. It could have a huge impact on your local economies."

Obama, a Democrat, has asked lawmakers to extend jobless benefits as part of a package of measures he wants passed before Congress goes home for the Christmas holidays.

The White House has warned that failing to extend the benefits, which expired Wednesday, could undermine the country's economic recovery as it pulls out of the worst recession since the 1930s.

Nearly 15 million Americans are counted as unemployed, of whom nearly 9 million are claiming unemployment benefits.

UNFUNDED

Democrats want to extend jobless benefits for another year but have not scheduled a vote in either the House of Representatives or the Senate.

Republicans insist that the cost of extending the benefits, estimated at $65 billion, be offset by cuts elsewhere in the budget to avoid adding further to the country's debts.

Obama said he hoped both parties would agree to extend the benefits, noting that unemployment insurance traditionally attracts bipartisan support during difficult economic times.

U.S. unemployment insurance for those on long-term aid, which Congress had already extended to up to 99 weeks from a traditional 26 weeks of support, provides around $300 a week.

If Congress fails to act, 2 million people will lose their benefits at the end of the month, the White House said.

That number will rise to 7 million by November 2011, affecting the lives of 40 million Americans if the families of people losing extended benefits are also counted, it said.

The White House Council of Economic Advisers argues the entire economy suffers if jobless benefits lapse because it takes money away from people that would otherwise be spent, denting consumer demand essential to support recovery.

600,000 JOBS

The council estimates this impact could lower U.S. economic output next year by 0.6 percent, at a cost of 600,00 jobs that would have been created if benefits were extended.

"The impact on the individuals is quite significant and the overall impact of the drop-off in their spending from terminating it would be fairly damaging on our nascent recovery," council Chairman Austan Goolsbee told reporters.

Obama has also urged lawmakers to extend tax cuts for middle-class American families due to expire on December 31.

His economic team is negotiating with Democratic and Republican congressional leaders on a compromise.

Obama wants Bush-era tax cuts for wealthier Americans to rise next year. Republicans, who won control of Congress in midterm elections on November 2, want the tax cuts made permanent for all Americans.

The White House has repeatedly pointed out that Republicans are blocking more aid to the jobless while wanting to extend tax cuts for richer Americans.

(Additional reporting by Matt Spetalnick, Patricia Zengerle and Andy Sullivan; Editing by Philip Barbara)

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