But the Senate cannot take the extension of the tax cuts up due to overcrowding on the calendar — it is dealing with the unemployment extension, financial regulatory reform and a host of other bills. For that, Sen. Harry Reid (D-Nev.) hit at the GOP yesterday: “Maybe if they stop stalling everything that comes to the floor we might be able to get to that stuff. We’ll get to that when we get through unemployment insurance, Wall Street reform, and a few other things.”

Democrats would like to “get to that,” but some senators are starting to predict, given the bottleneck in the Senate and the politics of raising taxes on anyone, that won’t happen until after the election.

These are contentious times when it comes to the relative importance of debts and deficit-spending. Hawks — and the American public — are deeply worried about the $13 trillion in the red the government finds itself in and the specter of inflation. Doves — and the American public — are concerned that the sky-high unemployment rate and slow recovery means the government might need to raise deficits more to boost growth and create jobs.

Bernanke’s remarks could have been controversial — particularly given that several members of the Fed have started to call for rate hikes that would cool off the economy but prevent inflation from taking hold. But his prepared testimony and the hearing thus far offer a dose of cool realism: Things are bad but getting better slowly, and the debt situation is “unsustainable.”

First, Bernanke noted the headline statistics: “Real gross domestic product will grow in the neighborhood of 3.5 percent over the course of 2010 … probably [meaning] only a slow reduction in the unemployment rate over time. In this environment, inflation is likely to remain subdued.”

Still, he did not advocate for more deficit spending or stimulus: “Although the support to economic growth from fiscal policy is likely to diminish in the coming year, the incoming data suggest that gains in private final demand will sustain the recovery in economic activity.”

He again noted the drag the housing market has had on the economy: “In the housing market, sales and construction have been temporarily boosted lately by the homebuyer tax credit. But looking through these temporary movements, underlying housing activity appears to have firmed only a little since mid-2009, with activity being weighed down, in part, by a large inventory of distressed or vacant existing houses and by the difficulties of many builders in obtaining credit.” He did not elaborate on the possibility of a continued decline in home prices, and the ripple effect that might have on the economy.

He spoke about Europe and Greece, and warned that the United States should learn something from across the pond, without scaremongering: “Ongoing developments in Europe point to the importance of maintaining sound government finances. In many ways, the United States enjoys a uniquely favored position. Our economy is large, diversified, and flexible; our financial markets are deep and liquid; and, as I have mentioned, in the midst of financial turmoil, global investors have viewed Treasury securities as a safe haven.”

And he saved his strongest words to state that deficits should only be widened in emergencies, calling the current path “unsustainable” (emphasis added): “The exceptional increase in the deficit has in large part reflected the effects of the weak economy on tax revenues and spending, along with the necessary policy actions taken to ease the recession and steady financial markets. As the economy and financial markets continue to recover, and as the actions taken to provide economic stimulus and promote financial stability are phased out, the budget deficit should narrow over the next few years. Even after economic and financial conditions have returned to normal, however, in the absence of further policy actions, the federal budget appears to be on an unsustainable path.”

Watch Bernanke respond to questions from House committee members here.

In his statement, he announced that the White House passed a long-awaited but recently drafted proposal to encourage small-business hiring to Congress this morning. Additionally, he signaled that the White House might take action to help local governments considering job cuts due to budget shortfalls.

[We] still have more to do. In my State of the Union address, I called for a $30 billion small business lending fund, which would help increase the flow of credit to small companies that were hit hard by the decline in lending that followed the financial crisis.  And obviously small businesses are a major source of job creation.

This morning, we sent draft legislation to Congress on this fund, which now includes a new state small business credit initiative.  This state initiative, which was designed with the help of governors and members of both the House and the Senate, will help expand lending for small businesses and manufacturers at a time when budget shortfalls are leading states to cut back on vitally important lending programs.

In addition, with state and local governments facing huge budget gaps, we’re seeing layoffs of teachers, police officers, firefighters, and other essential public servants — which not only harms the economy, but also the community and the economy as a whole.  So we are working with Congress to find ways to keep our teachers in the classrooms, the police officers on the beat, and firefighters on call.

Now that the unemployment rate is 6.9 percent, and people are applying for unemployment benefits at a record pace, Hawaii has a problem: a state law that triggers an automatic tax increase to cover shortfalls in the unemployment system. And whatever money Hawaii’s employers saved during the boom employment times, they’re about to have to repay in spades. The per-employee tax to fund unemployment benefits will go from $90 to $1,070 per worker this year — absent legislative intervention — to cover systemic shortfalls.

Lingle is now calling for lawmakers to limit the per-employee tax increase to 60 percent, a $54-per-employee increase. Does anyone think that employers saved enough on the tax cut from 2007 to 2009 to make up for the current need for a massive increase?

But don’t hold your breathe waiting for Republicans to start screaming about how massive tax reductions led to larger deficits in the end. These days, only spending can lead to deficits.

Breaking from previous administrations, Obama’s budget acknowledged that fighting the wars in Iraq and Afghanistan will actually cost money; it conceded that big pay cuts for doctors treating Medicare patients would never be realized; it admitted that tens-of-billions of dollars in revenues generated by the alternative minimum tax would never be collected because Congress steps in each year to prevent millions of middle class families from paying the tax. (This year, the AMT patch arrived in the stimulus bill — at a cost of $70 billion. All of it borrowed.) And, rather than projecting the figures out for only five years (like President George W. Bush made a habit of doing), Obama’s budget looked 10 years ahead, to lend a better picture of the fiscal imbalances that loom further down the road.

Leave it to Congress to bring some of those gimmicks back.

Both Senate Budget Committee Chairman Kent Conrad (D-N.D.) and House Budget Committee Chairman John Spratt (D-S.C.) this week are considering spending proposals of their own, rife with some of the very tallying dishonesties that have plagued the past. An editorial in The Washington Post today has a concise rundown.

The congressional budgets, The Post points out, look ahead only five years. They eliminate $250 billion included in Obama’s budget for more Wall Street bailouts, though the lawmakers “have no reason to believe it won’t be needed.” And Spratt acknowledges only one year of funding for the AMT patch — not the required five — while Conrad includes only three years of AMT money.  The Post offers an explanation:

There’s no mystery as to the motivation for this dishonesty. Like Mr. Obama, the Democrats in Congress want to spend more on education, energy and other popular programs. Like Mr. Obama, they don’t want to level with voters about the need to pay for such programs through increased taxes. According to the CBO, Mr. Obama’s budget plan would have the government spending more than 23 percent of gross domestic product throughout the second half of this decade while collecting less than 19 percent in revenue. Rather than fix this problem, Mr. Conrad in his budget proposal closes his eyes and wishes it away.

Last month, Conrad said Obama’s plan “is a more accurate reflection” of federal spending than past budgets, and he went after GOP critics for “things that the other side is not counting at all,” pointing specifically to the AMT patch.

Conrad also gave a curious answer when asked specifically if the AMT fix should be offset:

I believe extending the alternative minimum tax past the next couple of years should be offset. And I have taken that position consistently.  I don’t think it should be offset at this time of severe economic weakness.  I think that would be counterproductive. But beyond the next couple of years, when we are now seeing forecasts from CBO and OMB of economic recovery, at that point, I think it should be offset.

Instead he did just the opposite, funding the AMT for three years before abandoning it later.

Both the House and Senate budget panels have plans to pass their proposals out of committee today, with the full chambers expected to consider them next week.

Experts have pointed out that real change in Washington comes only in times of severe crisis. At least as it pertains to budgets, it seems that the current crisis isn’t severe enough yet.

This is an old argument, of course. The GOP has long-fancied itself the party of fiscal responsibility, which is strange because the image has no basis in reality.

Consider the following: When Ronald Reagan was elected president in 1980, the federal debt was about $908 billion, according to Treasury Department figures. Over the next eight years, that figure rose to $2.6 trillion, representing more unpaid spending than the previous seven presidents combined could fritter — all in the name of smaller government, of course.

By 1992, President George H.W. Bush had bumped that figure to $4.1 trillion, to which Bill Clinton added another $1.6 trillion by 2000 — meaning that Bush the elder racked up about the same amount of debt in four years that Clinton did in eight.

Then the real spending started.

Under the eight-year tenure of George W. Bush, the country accumulated another $4.3 trillion in unpaid bills. For roughly six of those eight years, Republicans controlled both chambers of Congress, meaning they wrote and approved the budget bills that dictated federal spending.

The result? Well, in 2007, roughly nine percent of federal outlays — or $237 billion — went to pay the interest on the debt alone. That’s nearly one-third of the cost of the economic stimulus bill moving through Congress right now.

We know that McConnell will blame the Democrats for their reckless spending and failure to tilt the stimulus bill more heavily toward tax cuts. It would be nice also to hear an apology for his party’s own binge.