"Today, the best way to use deficits and government debt is to focus on distributional issues, particularly the unemployed, both actual and potential. In an extended balance-sheet recession of this type, unemployment benefits need to be substantial and prolonged. The argument that this would discourage the unemployed from seeking work has merit in normal times, but not now.
Today’s unemployment, after all, is structural, rather than the result of perverse incentives. Benefits should be expanded and extended for a limited, discretionary period. When structural barriers to employment have diminished, unemployment benefits should revert to their old norms. Doing this would not only reduce the unequal burden now being carried by the unemployed; it would also help to sustain consumption, and perhaps reduce some precautionary savings among those who fear losing their jobs in the future."