Greg Mankiw, claiming agnosticism about whether or not unemployment insurance should be renewed, offers some bad arguments against it:
[W]hen I hear economists advocate the extension of UI to 99 weeks, I am tempted to ask, would you also favor a further extension to 199 weeks, or 299 weeks, or 1099 weeks? If 99 weeks is better than 26 weeks, but 199 is too much, how do you know?
The simple answer to the question of when you stop extending unemployment insurance is when the job market is back to normal. Right now, with five job-seekers for every opportunity to work, we would still have abnormally high unemployment if every single open job were filled. I'm sure people would be happy to set a target based on ending long-term extensions after certain targets have been hit. But Mankiw thinks the real answer is, in fact, a plot to take money away from the wealthy:
... economists who strongly favor the extension of UI benefits, such as those who signed this letter, also tend to favor more income redistribution in general. I suspect, therefore, that the foundation of their support comes not from having weighed the specific pros and cons of UI per se, but rather from a more general desire to "spread the wealth around." That issue is, as I tell my students, more a matter of political philosophy than it is of economics.
What a brilliant plot on the part of these economists, fulfilling their socialist desire to maintain the jobless on the bare edge of poverty under the guise of the social safety net. Where Mankiw sees creeping socialism, he misses a real concern held by these economists: He doesn't mention poverty at all in his post. An actual reason to support a social safety net is to reduce temporary poverty and the economic, as well as moral, costs it imposes on a society. This is more than just raising aggregate demand, which Mankiw does touch on. With 2 million people scheduled to lose benefits in the new year, and 6.7 million scheduled to lose them of the entire course of 2011, poverty is guaranteed to increase without action: 3.3 million people were protected from poverty in 2009 by UI.
Poverty, of course, has negative effects on our economic infrastructure. It diminishes human capital -- workers' skills atrophy, their earning potential is limited, and, in some models, crime increases. For children, the situation is even worse: The Center for American Progress suggested a few years ago that the costs of childhood poverty amount to $500 billion a year. That suggests the unemployment insurance is an important investment in maintaining our labor force until the job market recovers; ideally, some kind of policy action could be taken to help it do just that.
But regardless of what you think the right approach to job creation is, the fact is that there aren't enough jobs, and helping bear those costs temporarily -- even when temporary seems like a long time -- strikes most people as a good idea. That's why Congress, until last week, never rejected an extension of unemployment insurance before when the jobless rate has been over 7.2 percent. Today, 9.8 percent of the work force, nearly 15 million Americans, remains unemployed.
-- Tim Fernholz