White House says jobless benefits ‘disincentive’ for work

Larry Kudlow, the White House economic adviser, said the administration opposed extending federal unemployment payments beyond July because the measure created to respond to Covid-19 was a “disincentive” to work.

“The $600 . . . is in effect a disincentive. We’re paying people not to work. It’s better than their salaries,” Mr Kudlow told CNN on Sunday. “That might have worked for the first couple of months [but] it will end in late July.”

Congress passed a $2.2tn package in March that provided $600 a week for jobless Americans, but the payments end in July. The Democratic-controlled House passed a $3tn stimulus that would extend the measure through the end of the year, but the Republican-controlled Senate has refused to entertain the bill, arguing that the economy is recovering.

Mr Kudlow said Donald Trump, president, was considering “some kind of bonus for returning to work” but that it would not be as large as the $600 cheques. The federal benefits were intended to help unemployed Americans shore up their finances beyond the standard jobless benefits provided by states.

The federal unemployment payments have helped millions of Americans who have been forced out of work as businesses have closed because of lockdowns.

While the US economy added an unexpected 2.5m jobs in May — lowering the unemployment rate to 13.3 per cent — 21m Americans remain out of work, according to the latest report from the US labour department.

Mr Kudlow said the administration was optimistic that the economy was recovering because the number of new unemployment claims had fallen for the past 10 weeks. “We are reopening, and businesses are coming back. And, therefore, the jobs are coming back,” he told CNN.

The debate over how much Congress should provide in any package has become a source of controversy as Democrats and Republicans prepare for November’s presidential and congressional elections.

While Republicans argue that the nascent recovery underscores the need for less stimulus, Democrats say the number of unemployed Americans warrants another big package until the economy has largely recovered.

Peter Navarro, a White House official, on Saturday said Mr Trump would back a $2tn stimulus package to return manufacturing jobs to the US. Kevin Hassett, another White House economic adviser, this week said the odds of Mr Trump supporting another package were very high.

Larry Kudlow: “We’re paying people not to work. It’s better than their salaries” © REUTERS

Since the start of the pandemic, Congress has provided more than $3tn in stimulus funding, including $660bn for small businesses to help them pay their staff and remain open during the crisis.

While Mr Kudlow is seen as an economic cheerleader, Jay Powell, the Federal Reserve chairman, this week signalled that the central bank was “not even thinking about thinking about raising rates” because of concerns that unemployment levels would take a long time to return to the low levels recorded before the pandemic struck.

The Fed expects the US economy to contract 6.5 per cent this year as the jobless rate declines to 9.3 per cent.

The debate about how quickly the economy will recover comes as many states are grappling with a rise in Covid-19 cases as they ease lockdowns.

Robert Redfield, the director of the Centers for Disease Control and Prevention, this week said the US was “not out of the woods”. His warning came as states in the south and west which were spared the early brunt of the disease were seeing daily increases.

The number of US coronavirus cases increased by more than 25,000 over the weekend, with several southern states reporting the sharpest rises as they reopened for business.

In Texas, the number of new cases climbed by 2,331 to more than 86,000, according to the Covid Tracking Project. New cases also surged in Alabama, South Carolina and Florida, where a jump of 2,581 cases on Saturday broke records for a third day in a row.

Florida’s governor Ron DeSantis has loosened clampdowns on restaurants, bars, amusement parks, gyms and retail stores while requiring social distancing and extra sanitising. In St Petersburg, a beach town on Florida’s Gulf of Mexico coast, three bars announced they will close after employees tested positive for Covid-19, the Tampa Bay Times reported.

More than 2m people have tested positive for Covid-19 in the US, the most of any country, and more than 100,000 have died of the virus. 

Mr Trump will hold a rally in Tulsa on Saturday, in a move that critics have assailed as risking the lives of his supporters. The indoor venue for what will be the president’s first rally in three months has a capacity of 19,000. The president has suggested that he does not want to see empty seats, raising concern about the ability to ensure social distancing at the event.

Additional reporting by Gregory Meyer

Follow Demetri Sevastopulo on Twitter: @dimi