On ABC's This Week, conservative columnist Michelle Malkin claimed that "it was Larry Katz, who was a chief labor economist under the Clinton Labor Department, who came out with a study ... that if you keep extending these temporary unemployment benefits, you're just going to extend joblessness even more." But Katz has reportedly said that should not be a concern during the current financial crisis because of the scarcity of jobs.
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Malkin cited Katz in claiming extending unemployment benefits extends joblessness
From the August 2 edition of ABC's This Week with George Stephanopoulos:
GEORGE STEPHANOPOULOS (host): One of the things we saw in those -- in that growth report that came out on Friday is that private economists saying that, in that case, the stimulus actually did make something of a difference, maybe up to a 3 percent difference in the growth --
AL HUNT (Bloomberg News): Yeah, and you hear that, George, from state and local officials, too. I think that's important. But I think -- I think, really, the nub of this thing working or this economy taking off at some point really is the consumer. And if the consumer gets confident -- there is no tech boom to propel it. There isn't -- there's not going to be a housing boom. It has to be driven by the consumer more than business investment, I think. And you said earlier, I think, that the consumers still are pretty skittish. And until that confidence comes back, or unless that confidence comes back --
STEPHANOPOULOS: And at what point are they going to be willing to come back without the incentive of $4,500 in front [inaudible].
MALKIN: Well, exactly. If you put enough government cheese in front of people, they're just going to keep eating it, and you're just kicking the can down the road. And just to hammer this point about the unemployment benefits extension again, it was Larry Katz, who was a chief labor economist under the Clinton Labor Department, who came out with a study -- and there are a lot of these smart economists who say this -- that if you keep extending these temporary unemployment benefits, you're just going to extend joblessness even more.
STEPHANOPOULOS: I don't know if I follow that. You're saying people are choosing --
MALKIN: That was a Clinton economist who said it, George.
STEPHANOPOULOS: -- choosing to take the unemployment benefits when a job is available?
MALKIN: Seventy-nine weeks already, and then they're going to extend it by another 13 weeks. And what happens is, according to these economists who have seen it, including this Clinton economist, is that people will just delay getting a job until the three weeks before the benefits run out.
CYNTHIA TUCKER (ABC News contributor): Well, that might be true when there are jobs out there that are available, but there are very few jobs available at the moment. So I don't think people are just using that unemployment to be lazy instead of going out there searching for a job. Most jobs --
MALKIN: I'm not making a moral judgment. It's an incentive problem.
Katz supports unemployment benefits in current crisis because of scarcity of jobs
Katz, now a Harvard economist, says possibility of unemployment benefits extending joblessness isn't currently a concern due to the scarcity of jobs. As Crooks & Liars' John Amato noted, an August 1 New York Times article reported that, in the Times' words, Katz believes that the theory that prolonged unemployment benefits can "reduce the incentive to seek work ... should not be a concern now because jobs remain so scarce." Katz also reportedly told the Times that when people stop receiving unemployment benefits, many apply for disability benefits, which costs the federal government as well.
From the August 1 Times article:
Traditionally, many economists have been leery of prolonged unemployment benefits because they can reduce the incentive to seek work. But that should not be a concern now because jobs remain so scarce, said Lawrence Katz, a labor economist at Harvard.
For every job that becomes available, about six people are looking, Dr. Katz said. "Unemployment insurance gives income to families who are really suffering and can't find work even if they are hustling to look," he said.
With the economy still listing, he added, a temporary extension can provide a quick fiscal stimulus. And, Dr. Katz said, when people exhaust unemployment and health insurance, many end up applying for disability benefits, which become a large, unending drain on the Treasury.