Larry Kudlow, who served as top economic adviser under former President Donald Trump, said President Joe Biden's economic relief package discourages some people from trying to find work.
Kudlow made his comments Friday during an appearance on Fox News' "America's Newsroom."
He said Biden administration officials were warned that enhanced unemployment benefits, combined with direct payments, could backfire.
"We tried to warn them," Kudlow said. "They were very generous, and of course the checks coming out are very generous. [Americans] are being paid a lot of money to stay home. I hate to say it because I think most people want to work, but on the other hand, people are very smart, and they probably want to work, but if it doesn’t pay, they’ll probably stay home longer."
Under Biden’s $1.9 trillion rescue package, the government is supplementing weekly jobless benefits by $300 a week. The figure is in addition to the average state unemployment payment of about $340.
"Look, the economy is growing rapidly," Kudlow said. "I think the jobs situation is turning around. We're going to get a lot of new jobs in the next report. We had over a million in the last report. There's a huge boom going on. Retail sales numbers — off the charts. Manufacturing production — off the charts. Housing starts — off the charges. So that's good."
The number of Americans who applied for unemployment benefits fell last week to 576,000, a post-COVID low and a sign that layoffs are easing as the economy recovers from the coronavirus recession, according to The Associated Press.
The Labor Department said Thursday that applications plunged by 193,000 from a revised 769,000 a week earlier. Jobless claims now are down sharply from a peak of 900,000 in early January and well below the 700,000-plus level they had been stuck at for months, the AP reported.
But Kudlow noted, in certain cases, unemployment assistance benefits are "too generous."
"It's difficult," he said. "You've got to try to get your unemployment assistance at a level that helps those who are truly needy but doesn't discourage work. That's really the tricky part.
"My suspicion is that all along we've been playing with fire on the various relief packages. And I think the last relief package really went over the line. That's the problem. Long-term, it's not healthy."
Kudlow maintained a lot of economists on both side of the aisle believe "the more unemployment insurance you poke out, the more unemployment you're going to have. And, secondly, the longer the unemployment insurance lasts, then the longer unemployment is going to last."
He said officials need to be cautious of that and "sensitive to that" when making these policies.
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