Extending unemployment benefits for millions of unemployed Americans would help create jobs and boost the overall economy, U.S. Nobel Prize-winning economist Paul Krugman said Monday.
Four and a half years have passed since the U.S. economy officially began to recover, but long-term unemployment remains " disastrously high," Krugman opined in his latest column article published in Monday's The New York Times.
The Nobel laureate believed employment in today's American economy is limited by demand, not supply. Slashing unemployment benefits -- which would have the side effect of reducing incomes and hence consumer spending -- would just make the situation worse.
"The view of most labor economists now is that unemployment benefits have only a modest negative effect on job search -- and in today's economy have no negative effect at all on overall employment," Krugman said. "On the contrary, unemployment benefits help create jobs, and cutting those benefits would depress the economy as a whole."
Unemployed Americans can get up to 26 weeks of state-paid unemployment benefits, and the length of the benefits has been extended in 2008 after the onset of the financial crisis with the financial help of the federal government. The federal government- funded program, which provides extended unemployment benefits after state benefits expire, has been repeatedly renewed in past years.
Without congressional action, the federal program will expire at the end of December and about 1.3 million Americans would see their extended benefits be cut off and about 3.6 million more will lose access to unemployment benefits beyond 26 weeks by the end of 2014, the White House said in a report last week.
U.S. President Barack Obama on Saturday urged lawmakers to pass an extension of the unemployment benefits before Christmas. House Speaker John Boehner signaled willingness to consider the extension, but said it would be better to focus on economic growth rather than more government programs.