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Calling for stimulus, Democrats cite 'real cliff' if jobless benefits aren't extended

Updated Friday Dec. 7, 8:45am ET Democratic senators said Thursday that the economy is still weak enough that it needs more federal stimulus spending as part of any year-ending fiscal deal with Republicans.

Senate Democratic Policy Committee chairman Sen. Charles Schumer, D-N.Y., told reporters, “I believe you need a stimulus. It could be a payroll tax (cut), it could be something else, but you need some kind of ‘oomph’ to the economy in this first year, particularly now that the statistics show it’s moving slowly.”

On Friday, the Bureau of Labor Statistics reported that non-farm payroll employment increased by 146,000 in November, while the unemployment rate went from 7.9 percent in October to 7.7 percent last month.

"The number of unemployed persons, at 12.0 million, changed little," the BLS report said. The number of long-term unemployed, those Americans who were jobless for 27 weeks or more, was little changed at 4.8 million in November.

And the number of people in the labor force -- either working or actively looking for work -- dropped by 350,000.

Jacquelyn Martin / AP

Sen. Charles Schumer, D-N.Y., right, accompanied by fellow Senate Democrats, gestures during a news conference on Capitol Hill in Washington, Thursday, Dec. 6, 2012, to discuss efforts to "boost the economy and prevent Americans from abruptly losing their jobless benefits at the end of the year."

Schumer and other Democrats said at a Capitol press conference Thursday that an extension of emergency unemployment insurance benefits must be part of any year-ending "fiscal cliff" deal.

The Democratic senators cited the need to spur a sluggish economy, which had a 7.9 percent jobless rate in October. An extended unemployment benefit “produces a major economic stimulus,” said Sen. Jack Reed, D-R.I. His state has a 10.4 percent unemployment rate.

“We’re all talking about a stimulus. How do we get the economy moving? This is the best stimulus there is,” Schumer said.

He and other Democrats gave a textbook Keynesian argument for continued unemployment payments to those who might otherwise lose them at year end. People who get unemployment checks “are going to the local stores, they are increasing demand,” Reed said. 

The Democrats said the heated, weeks-long debate on the fiscal cliff of spending cuts and tax increases seemed somewhat unreal and theoretical to some of their hard-pressed constituents.

While congressional leaders wrangle over the fiscal cliff, “two million Americans are now looking over a real cliff,” Reed said.

President Barack Obama headed to Virginia where he reminded the public that if the fiscal cliff isn't averted, taxes will increase on 98 percent of Americans next year. The Daily Rundown's Chuck Todd reports.

Schumer said, “Many of the elements of the ‘fiscal cliff’ are abstract concepts to struggling middle-class families, (but) unemployment benefits are not abstract.”

“If there is an agreement on the fiscal cliff, unemployment insurance must be included,” Sen. Tom Harkin, D-Iowa, said. And “if there’s not an agreement reached, we must extend unemployment separately.”

He added, “We must not leave here for the holidays until we extend unemployment insurance.”

Asked how this call for more stimulus spending was consistent with the idea of reducing budget deficits and the growing burden of federal debt, Sen. Chris Coons, D-Del., said, “Not all spending is created equal.”

Asked the same question later, Senate Majority Leader Harry Reid cited a story he’d heard Thursday morning on National Public Radio which said the European Union was “concerned about all their austerity,” that is, the reduction in European governments’ spending at a time of persistently high unemployment.

In the tense negotiations back-and-forth between President Barack Obama and Congressional Republicans, the chances of cliff-diving appear to be less likely, but there's still no hard deal on the table yet. Former communications director for the Blue Dog Democrats Kristen Hawn and David Winston, a veteran Republican pollster, discuss.

Reid argued that fiscal restraint and short-term stimulus aren’t mutually exclusive: “You can do both…. There are many, many things you can do to reduce debt, but still have (a) simulative aspect.”

According to the Congressional Budget Office, unemployment insurance benefits totaled $94 billion in fiscal year 2012, a substantial increase over the $33 billion paid out in fiscal year 2007 before the economy toppled into the recession. The total cost of jobless benefits over the past five years has been $520 billion.

The CBO said fully extending the current Emergency Unemployment Compensation program and temporary provisions of the Extended Benefit program for one year would cost $30 billion.

Democratic senators said they want the money spent on unemployment to not be offset by spending cuts elsewhere in the federal budget. “An offset, I think, is unnecessary and its bad economics,” said Sen. Richard Blumenthal, D-Conn.

At times the Democrats' portrayal of the economy Thursday sounded like the gloomy picture painted by Republican presidential candidate Mitt Romney. Independent Sen. Bernie Sanders of Vermont, who caucuses with the Democrats said, “Sometimes, maybe especially here inside the Beltway, we forget that this terrible, terrible recession continues in many, many parts of the country. While official unemployment is 7.9 percent real unemployment – counting those people who have given up looking for work and those people who are working 20 hours and they want to be working 40 hours – is closer to 15 percent.”

Harkin told reporters after the press conference, “I don’t see us getting out of this high unemployment picture for some time. I think it’s going to be a gradual reduction.”