Wall Street Journal (11/26/12) Ben Casselman

More than 40% of the nearly five million Americans who receive unemployment insurance are set to lose those benefits if federal programs expire as scheduled at year-end. While some economists have expressed concern that cutting off those benefits could harm the economy by leaving millions of Americans with less money to spend, others warn that overly generous benefits can prolong unemployment by giving people an incentive to keep looking for jobs they are unlikely to find. “If you’ve been unemployed for a year, that job you’re looking for probably doesn’t exist,” says James Sherk, a senior policy analyst for the Heritage Foundation. Jesse Rothstein, an economist at the University of California, Berkeley, says unemployment benefits can encourage people who might otherwise have given up to instead keep looking for work, or provide the opportunity to develop new skills.

Congress has repeatedly extended unemployment benefits amid high joblessness, and it could do so again. But the programs have gotten caught up in the fight over the “fiscal cliff,” a package of tax increases and spending cuts due to take effect early next year. Some Democrats are pushing to extend benefits again, but the programs must contend not only with Republican opposition but also competing priorities such as business and individual tax breaks.