White House Faces Pressure on Jobs

Republicans, who have pilloried the administration for ongoing job-market woes despite the previous stimulus package, argued that any new stimulus package should focus on tax cuts.

"I think everyone knows that American families and small businesses continue to struggle," said House Minority Leader John A. Boehner (Ohio). "These high unemployment rates are not coming down. The stimulus is not working. And some of the policies that are continuing to be promoted here are not going to help the situation; they are going to make it worse.

The difficulty lawmakers face in enacting new spending is reflected in the bickering over a plan to extend emergency unemployment benefits for another three months -- an idea that many independent economists consider a "no-brainer," as IHS Global Insight chief financial economist Brian Bethune put it.

The House approved a bill to extend benefits in states where the jobless rate is 8.5 percent or higher two weeks ago, but the measure has since faltered in the Senate. On Thursday, Senate Democrats resolved a dispute over how broadly to distribute the benefits, offering a $2.4 billion plan that would grant up to 14 additional weeks of benefits to workers in all 50 states while offering up to 20 additional weeks to jobless workers in the hardest-hit states. The measure would be fully paid for by extending the federal unemployment tax through June 2011.

Republicans objected to efforts to speed the bill to a vote in the full Senate, however. And while Senate Minority Leader Mitch McConnell (R-Ky.) has said that Congress should act to extend unemployment benefits, he has questioned the need for broader spending on the economy.

"When you get into the very high levels of unemployment we'll be struggling with next year, not extending benefits threatens to undermine not only the spending of households under that stress, but the very fragile confidence of everyone else," said Mark Zandi, chief economist of Moody's Economy.com, who was consulted by lawmakers as they crafted the original stimulus bill.

Another open question is whether to extend the $8,000 tax credit for first-time home buyers. The program is widely credited with helping the housing market stabilize by driving up existing-home sales, home construction and housing prices in recent months.

And that has spinoff benefits: People buying a house tend to spend money on furniture and upgrades, and higher home prices make people feel wealthier and reduce losses by banks on foreclosures. On the other hand, the program has been expensive, and its benefits accrue to people who are already affluent enough to buy a home.

Meanwhile, liberal economists are urging Democrats to consider public-works programs and another round of aid to states, including many that are facing budget cuts projected to cost 700,000 jobs over the next two years. "States either have to raise taxes or cut spending. And when they cut spending, they lay people off and buy fewer products and services from the private sector," said Ross Eisenbrey, vice president of the Economic Policy Institute, a labor-oriented research organization.

Rep. Chris Van Hollen (D-Md.), who leads the campaign committee tasked with electing Democrats to the House, said there's no consensus within his party about how far to go beyond the initial stimulus package.

"If the assessment is the economy is picking up steam, you would want to continue to do the safety-net stuff, but you would not want to get into another big package that was not paid for," he said. "But if you determined the economy was not improving as expected, then you would consider the other option."

While White House officials say they have yet to settle on a strategy, they add that economic problems will continue until unemployment falls to more acceptable levels.

"The president is happy that GDP is growing," said a senior official, who spoke on the condition of anonymity to discuss the internal deliberations. "But he says unless we see some serious job creation, we are nowhere near out of the woods."