In a conference call with reporters Thursday, Council of Economic Advisers Chairman Austan Goolsbee and council member Cecilia Rouse urged Congress to extend unemployment insurance benefits for millions of Americans who are out of work, citing a new report that argues not doing so would have dire consequences for the U.S. economy.
The council’s report, which details how a failure to extend the aid would affect people on a state-by-state level, says nearly seven million Americans could lose coverage by the end of next year and that 600,000 jobs are at stake. Goolsbee contended the gross domestic product would be six-tenths of a percent point lower in December of next year if the benefits are not extended, slowing the nation's recovery from the worst recession since the Great Depression.
According to an earlier report by the National Employment Law Project, some two million workers nationally could lose benefits in December if they are not extended, an estimate the CEA also uses. The U.S. Joint Economic Committee estimates failure to extend the benefits program "would drain the economy of $80 billion in purchasing power and result in the loss of over one million jobs over the next year."
"The data is quite clear from many outside sources that people on unemployment insurance, when they lose the unemployment insurance, there's a very significant drop off in the amount of consumption spending that they do," Goolsbee said. "If you're going to have millions of people just before the holidays losing their benefits and then multiple millions in the months that follow losing their benefits, the impact on consumer spending is significant."
The CEA report focuses on the temporary extensions that began in June 2008. Rouse said that in 42% of households, the unemployed worker was the sole wage earner, so the extensions had benefited more than 40 million people, including 10.5 million children.
"It's quite an important source of income for these families," she said.
Republicans have said they are willing to back an extension of the benefits, provided it is paid for with budget cuts elsewhere. The impasse over the benefits, which the White House says have long been considered emergency spending that does not have to be offset, comes at a time when the nation's jobless rate remains stubbornly high.
Many economists expect Friday's unemployment report to show November was the 19th straight month with a jobless rate above 9%.