With the holiday season in high gear, many of the unemployed could be forced out of their homes without money coming in to pay for rent or mortgages. Ending extended benefits could cause small businesses to falter as the unemployed lose income to put back into their local economies.
A bill to extend unemployment benefits fell short, by 17 votes, of the two-thirds majority needed under a special rule to pass earlier this month. Growing concerns over adding to the deficit have left some members of Congress hesitant about the bill, which is estimated to cost $5 billion a month.
The real tragedy of failing to extend benefits would be the loss of an estimated $5 billion a month in spending that comes from the long-term unemployed, says Heidi Sierholz, an economist and labor market columnist for nonpartisan economic think tank Economic Policy Institute based in Washington, D.C.
"That's $5 billion that's yanked out of the economy every month," Sierholz says. "Each month, almost 1 percent of the GDP will be taken out of the economy if we don't extend benefits, and that's going to be a massive drag on growth."
To answer some concerns over the rising deficit, President Obama's press secretary released a fact sheet Monday about freezing pay for civilian federal workers to help cut the deficit. The two-year freeze is expected to save $2 billion in 2011 and $28 billion over the next five years.
"Just as families and businesses around the nation have tightened their belts so must their government," the statement says. "That must be done in a targeted way that focuses our investments in what works and in what will lay the foundation for job creation and economic growth for years to come while cutting back elsewhere in our budget."
In Illinois, 127,000 will lose benefits by Christmas if unemployment benefits are allowed to lapse, Sen. Dick Durbin, D-Ill., said Sunday on "Meet The Press."
In a meeting between Congressional leaders and the president today, unemployment is a priority, in addition to the earned income tax credit, the child care tax credit and the making work pay tax credit, he said.
"We should be focusing on what it takes to move this economy forward," Durbin said. "We should not be worried about the discomfort of the wealthy, but the fact that there are many people struggling to survive every day now because they have no job and no means to keep their family together in very difficult times."
ABC's Sharyn Alfonsi contributed to this report.