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Beyond the Spin: Truths about debt and taxes

Obama and GOP leaders show they are not serious about fiscal responsibility.

The compromise between President Obama and Republican congressional leaders over extending both the Bush tax cuts and federal unemployment benefits proves that neither side is serious about wanting to reduce the federal debt or telling Americans the truth about the U.S. tax burden.

According to the Congressional Budget Office (CBO)and Congress' Joint Committee on Taxation, the package of extended tax cuts, unemployment benefits, and other features in the bill recently signed into law by President Obama will cost nearly $860 billion, including:

$544.3 billion for extending the Bush tax cuts for another two years, including $81.5 billion for the top 2 percent of earners;

$117.7 billion for a one-year Social Security tax break that would reduce payroll taxes from a rate of 6.2 percent to 4.2 percent on the first $106,800 of wages;

$69 billion in business tax breaks;

$68 billion for raising the estate-tax exemption from $3.5 million to $5 million for individuals and from $5 million to $10 million for families, with the remainder taxed at 35 percent;

$56.5 billion for extending federal unemployment benefits for an additional 13 weeks.

Obama and members of Congress took those actions knowing that debt - and the interest that must be paid on that debt - has being growing out of control.

"At the end of fiscal year 2008, debt held by the public [federal debt] amounted to $5.8 trillion - equal to 40 percent of the nation's annual economic output (gross domestic product, or GDP), a little above the 40-year average of 35 percent," noted the Congressional Budget Office. "Since then, the debt held by the public has shot upward, surpassing $9 trillion by the end of fiscal 2020 - equal to 62 percent of GDP, the highest percentage since shortly after World War II."

Alan Greenspan, former chairman of the Federal Reserve, favors repealing the 2001 and 2003 Bush tax cuts.

In an interview on 60 Minutes, former Reagan budget director David Stockman agreed: "We have now got both parties essentially telling the big lie with a capital 'B' and a capital 'L' to the public: and that is we have all this government, 24 percent of GDP, this huge entitlement program, all the bailouts. And yet, we don't have to tax ourselves and pay our bills. That is delusional."

It's even more delusional when compared to other industrialized nations.

According to the Organization for Economic Cooperation and Development, the combined taxes levied by local, state, and federal governments in the United States are among the lowest in the industrialized world. As a percentage of GDP, only two developed countries - Turkey and Mexico - have lower taxes.

A similar pattern emerges when looking at corporate tax rates. Of the industrialized countries, only four - Austria, Iceland, Germany and Turkey - have lower corporate rates.

When President George W. Bush signed the first tax cut in 2001, he said: "Tax relief will create new jobs, tax relief will generate new wealth, and tax relief will open new opportunities." Two years later, with a second tax cut under his belt, Bush said, "By speeding up the income tax cuts, we will speed up economic recovery and the pace of job creation."

But that didn't go as advertised.

"The economy boasted 132 million jobs in June 2001, the month that the first of the Bush tax cuts was signed into law," wrote Michael Linden and Michael Ettlinger of the Center for American Progress. "Three years later, in June 2004, there were just 131.4 million jobs. The economy did not add a single new job during the three years under the Bush tax cuts. The next three years were better than the first three as the private sector struggled back to its feet following the first Bush recession."

Without reducing taxes, Bill Clinton amassed a much more impressive record.

"President Bill Clinton, after raising taxes in 1993, oversaw an economy that went from 111 million jobs in August of that year. . .to 129 million jobs six years later - an increase of 16.2 percent, and more than three times better than under the Bush tax cuts," Linden and Ettlinger wrote.

When Obama signed a temporary extension of the Bush cuts into law, he said they would "grow our economy" and "create jobs for the American people."

We've heard those words before.