In 2010, President Obama signed a $858 billion tax cut deal that extended the Bush tax cuts through 2012 and unemployment benefits through 2011. It cut payroll taxes by 2%, adding $120 million to workers' spendable income. The Obama tax cut deal extended a college tuition tax credit. To partially pay for this, the 35% inheritance tax on the wealthy (estates worth $5 million individuals/$10 million families) was revived after a year-long lapse. It also included $55 billion in industry specific tax cuts. (Source: Washington Post, "Obama, GOP reach deal to extend tax breaks," December 7, 2010)
The Congressional Budget Office(CBO) found that the Bush tax cuts will create 4.6 jobs for every $1 million in cuts, which will be extended for two years. Unemployment benefits? Much better - at 19 jobs for every $1 million in benefits. Both are equally good at increasing the Federal deficit.
The CBO study also found that payroll tax cuts, which have been added as part of the negotiation, will create 13 new jobs for every $1 million in cuts. If these employers only get the cuts when they create new jobs, this boosts job creation - to 18 jobs per $1 million.
In addition to creating jobs, every dollar spent on unemployment benefits stimulates $1.73 in economic demand, according to an Economy.com study. That's because the unemployed spend every dollar they receive on basic essentials, such as food, clothing and housing. It is estimated that every month benefits are extended costs taxpayers $10 billion. However, it also generates $17.3 billion in economic growth.
At $17 trillion, the U.S. debt is the largest in the world. It is nearly equal to total annual economic production. The interest alone is $414 billion (Fiscal Year 2010) How did it get so large? Even before the economic crisis, the debt grew 50% between 2000-2007, ballooning from $6-$9 trillion. The $700 billion bailout helped the debt grow to $10.5 trillion by December 2008. The economic stimulus package and other stimulus spending added another $3 trillion in two years. Military spending boosted spending, while revenues from taxes declined after the recession.
The $787 billion economic stimulus package was approved by Congress in February, 2009. The plan was to jump start economic growth, and save between 900,000-2.3 million jobs. The economic stimulus bill allocated funds as follows:
- $288 billion in tax cuts.
- $224 billion in extended unemployment benefits, education and health care.
- $275 billion for job creation using federal contracts, grants and loans.