White House Economic Adviser: Jobs Act Is ‘Insurance’ Against Double-Dip Recession

October 31, 2011 - 4:31 PM

National Economic Council director Gene Sperling, President Obama and Energy Secretary Steven Chu

National Economic Council director Gene Sperling, left, talks to President Obama and Energy Secretary Steven Chu following a Cabinet meeting at the White House on May 3, 2011. (Official White House Photo by Pete Souza)

(CNSNews.com) – Congress should pass President Obama’s jobs plan so that it can act as an “insurance” policy against a double dip recession, National Economic Council director Gene Sperling said Monday.

“It is still fair for those of us in policy positions to ask, ‘When you already have nine percent unemployment and 14 million people out of work, isn’t it worth taking out some insurance against even the prospect – even the relatively less than 50 percent chance – that things could get worse?’ ” Sperling said at the Economic Club of Washington D.C.

Addressing the club’s monthly policy luncheon, Sperling argued that increased stimulus spending on jobs would act like insurance for the economy in the event that it slipped back into a recession – an event known as a double dip. Blue Chip economic forecasters found a 35 percent chance that the economy would experience a double dip recession in the near future.

“If you thought there was a one-in-three chance or even a one-in-four chance that your house was going to burn down next year, you would certainly find home insurance to be valuable,” he said. “Likewise the value of taking such insurance out against such a damaging outcome for our economy today is alone a strong basis for taking bold action on demand and job creation in the immediate future.”

Sperling contended that the payroll tax cut passed last year acted in a similar manner, helping to insulate consumers against an unexpected rise in gas prices caused by the “Arab spring” uprisings.

Obama’s jobs plan failed 51-49 in the Senate and has received little open Democratic support, attracting few co-sponsors for both the House or the Senate version. The House has not acted on the bill at all, but is waiting instead for the Senate to try to pass individual items, as Republicans had originally suggested.

A double dip recession occurs when the economy dips into recession, begins to grow again, then slips back into recession and begins shrinking again.

Some economists have warned that a double dip recession could occur sometime within the next year, although it would be difficult to tell exactly when that second recession begins.