That question will undoubtedly wait until after the debt-ceiling negotiations have finished, but probably not long afterward.  The deal signed that kept tax rates in place also extended jobless benefit funding for those who had not yet hit the 99-week maximum, a controversial decision that essentially set up yet another controversial decision.  Those funds run out at the end of 2011, and Yahoo’s Zachary Roth previews what the argument will be for yet another funding extension:

The recovery is weak now–but it could be headed for a major hit that will leave it even weaker.

At the start of 2012, the extended unemployment benefits approved by Congress in December 2010, which cover a maximum of 99 weeks per person, will expire. Though the benefits are hardly lavish–a little more than $300 a week for most recipients–their total impact on the economy is huge, because so many Americans are currently taking advantage of them. Moody’s Analytics estimates that when the benefits expire, $37 billion will be taken out of the economy, the New York Times reports. That’s enough to exert a significant slowing effect–at a time when the recovery is already a long way from robust.

Government benefits that go to poorer Americans, like unemployment insurance, tend to boost consumer spending more than other kinds of stimulus, because people living paycheck to paycheck have little choice but to spend the money, rather than saving it. So the disappearance of jobless benefits will take money out of circulation when economic growth is seeking to gain some traction.

Indeed, economists say that the withdrawal of jobless benefits will create a major ripple effect on growth as a whole. Consumer spending accounts for around 60-70 percent of U.S. economic activity, economists say. But with so many Americans having lost wealth in the housing bust, spending has been tepid for a while, preventing the recovery from gaining any momentum. Now, the end of the extended benefits will likely soon put a further crimp in spending.

A “big hit”?  Not exactly.  The US economy amounts to somewhere around $14.3 trillion a year.  Taking “$37 billion out of the economy” (more on that in a minute) would create an impact of … 0.26% to the annual GDP.  Even if one supposed that Nancy Pelosi’s estimate of a multiplier effect of 1.5:1 on unemployment payments is correct, that would still amount to 0.39% of GDP over the year.  In most quarters of the Obama administration, that’s less than the quarterly adjustments to GDP estimates.

Calling that a “big hit” to the American economy is absurd, but so is the argument that we’re taking it out of the economy by not spending it.  Frankly, it doesn’t exist in our economy in the first place.  We’re funding that program with money from other economies that we’re borrowing — with interest.  That produces a cost to the taxpayer that goes well beyond the 0.39% it represents in the overall economy.  To the extent that the money does exist in our economy, government only has it because it already took it out of the economy.  I’m not sure where Roth thinks the money originates, but taxes collected by government means less money in the private economy; money doesn’t grow on trees.

Losing benefits will constitute a big hit to the individuals unemployed, which is a perfectly legitimate argument, but casting a loss of $37 billion in aid as a dark cloud on the economy is just silly, especially in an economy with so many dark clouds that this begins to look like a ray of sunshine.  And, in fact, Roth even admits that it might just be that:

On the bright side, some studies have shown that when people face the loss of their benefits, they’re more likely to look for a job, and to look more aggressively. So the loss of benefits could motivate some job-seekers. But most economists appear to agree that jobless benefits have a larger stimulative impact–meaning, in other words, that the benefits likely lead to more jobs, rather than fewer.

That’s because “most economists” aren’t figuring on the lost opportunity costs of leaving that capital in the private sector.  If we’re paying those funds from collected revenues, then that is $37 billion not going into job-creating expansion that would produce long-term jobs rather than month-to-month benefits.  If we’re paying them out of borrowed money, then we’re spending future capital (at a higher price) that would have gone to long-term growth in exchange for non-growth benefit payments in the present.

Americans have largely agreed that short-term support for the unemployed has social benefits that outweigh short-term costs to economic growth, not because unemployment checks create economic growth.  (If that were true, why not just pay everyone a government salary?)  Stealing growth from the future on a long-term, seemingly interminable trajectory for those social benefits has never had a consensus, because it’s a sure way to kill the economic engine of growth in the US.