Deficit-mania has struck Washington again, with most Democrats and the Obama administration essentially accepting the propaganda of deficit hawks while also calling for extending unemployment insurance benefits. The result? The Senate failed again to pass a relatively bare-bones “stand-alone” benefits extension bill that doesn’t even include a COBRA extension, or aid to the states to pay for their swelling Medicaid rolls. Another modest $10 billion bill to help localities keep teachers on the job is also floundering, even though it’s paid for with spending cuts and legislative savings elsewhere in funding bills .

Any meaningful direct job-creation programs for the nearly 15 million Americans who are officially unemployed are also dead for now — despite a damning new report co-authored by the National Employment Law Project showing that it will take years to make up the jobs already lost. As even moderate pundit Eleanor Clift observed, after viewing a liberal panel calling for massive infrastructure programs to boost the economy, “The actual [unemployment] number, far higher than what the weekly stats tell us, is on the way to becoming a permanent feature of the new economy. And while governments scrambled to save banks, there’s no comparable urgency about creating jobs.”

After the vote, Senator Majority Leader Harry Reid vowed to try again when a new Senator from West Virginia is seated in the wake of the death of Democratic Senator Robert Byrd. Even the more Democratic-leaning House of Representatives (!) rejected earlier this week a stand-alone extension on Tuesday, too, although it passed a scaled-down one Thursday. But a new vote vote probably won’t take place until after the July 4th recess when Congress comes back into session on July 12th. If the procedure drags on through July, as a new report co-authored by the National Employment Law Project and Center for American Progress shows, the government estimates that over three million people could lose their benefits.

UPDATE: The House passed a short-term extension Thursday, but it’s too late to make a difference for those who will lose benefits before the full Congress resumes in July.

The key vote on the measure fell one short needed to overcome a GOP filibuster. Senator Reid declared (hat tip to The Washington Independent): “It is beyond disappointing that Republicans continue to stand almost lockstep against assistance for out-of-work Americans — especially since many of these same Republicans spent months protecting Wall Street and preserving tax cuts for CEOs who ship American jobs overseas.”

Politico highlights the political dynamics at work — and they don’t favor progressives or unions:

The death of Sen. Robert Byrd (D-W.Va.) this week and defection of Sen. Ben Nelson (D–Neb.), a fiscal conservative from a low-unemployment state, helped to seal the fate. But more than any other one issue, the impasse over jobless benefits has come to dramatize the Republicans’ almost single-minded focus on deficit reduction as an economic–and campaign–theme this election year.Just two Republicans, Maine Sens. Olympia Snowe and Susan Collins, joined in support of an estimated $34 billion bill to extend benefits through November. Early hopes of getting help from Sen. Scott Brown were dashed Wednesday when the Massachusetts Republican went to the Senate floor with his own alternative — heavily reliant on cutting unspent funds from last year’s giant recovery act.

Yet as the Campaign for America’s Future Dave Johnson points out:

The real deficit is jobs. That is one more of those things that everyone can see in front of their faces, but we’re told it isn’t what it is. There aren’t enough jobs, and we’re being told this is our fault because we wanted pensions and good wages and vacations and respect and dignity and please, sir, just a little slice of the pie.In case you haven’t noticed, the world’s economy is suddenly undergoing a classic “Shock Doctrine”-style, coordinated propaganda attack. The wealthy and powerful, having insisted that countries cut their taxes and run up debt, now insist that the middle class and poor must work harder, have their pensions reduced, sell off (to them) their publicly-held resources, and take other “austerity” steps to pay off the debt that these lazy, parasitic peasants dared to run up.

It was especially ironic that on the same day that the Senate bowed to the deficit-uber-alles crowd in Washington, AFL-CIO president Richard Trumka was trying to make the case to the President’s deficit commission — whose appointment reflects Wall Street’s conventional wisdom on deficit-cutting — on why expanding jobs and helping the jobless is good for the economy. As the AFL-CIO Now blog reported:

“We must have a job-centered approach to stabilizing the national debt, which would bring us closer to our goal of sustainable, broadly shared prosperity.”To a great extent, the size of the deficit depends on employment and growth. When employment and growth are weak, tax revenues are low and social assistance expenditures are high. When employment and growth are strong, the reverse is true.

He also warned the panel that ending stimulus spending that creates jobs and growth–as many Republican lawmakers are promoting–could send the U.S. and global economy into a double-dip recession, or worse. The Economic Recovery Act, said Trumka:

“did exactly what it was supposed to do. It increased the number of people employed by up to 2.8 million, increased the number of full-time jobs by up to 4.1 million and increased real GDP by up to 4.2 percent in the first quarter of 2010. But it wasn’t big enough.”

The harshest words for the deficit commission — whose ideology is helping fuel the Congressional rejection of jobs creation and unemployment benefits — was left for economist James Galbraith. As Firedoglake reports on his attack on the “cat food commission” (via the Roosevelt Institute):

For a quick snapshot, Galbraith’s testimony is divided into ten sections, which address the following points:-That the Commission’s work is illegitimate

-That current deficits and rising debt were caused by the financial crisis.

-That future deficit projections are generally based on forecasts which begin by unrealistically assuming full recovery

-That, having cured the deficits with an unrealistic forecast, CBO recreates them with another, very different, but equally unrealistic forecast.

-That the only way to reduce public deficits is to restore private credit.

-That Social Security and Medicare “solvency” is not part of the Commission’s Mandate.

-That as a transfer program, Social Security is also irrelevant to deficit economics.

-That markets are not calling for deficit reduction, either now or later.

-That in reality, the US government spends first & borrows later; public spending creates a demand for Treasuries in the private sector.

-That the best place in history (for this Commission) would be no place at all.

Galbraith’s conclusion: “”You are plainly not equipped, either by disposition or resources, to take on the true cause of deficits now or in the future: the financial crisis.”

Neither is Congress, which seeks instead to protect the tax breaks of hedge fund managers while denying unemployment benefits to the jobless and allowing nearly 30 million people to remain unemployed or under-employed.

This article originally appeared in Working In These Times Blog.

About The Author: Art Levine , a contributing editor of The Washington Monthly, has written for Mother Jones, The American Prospect, The New Republic, The Atlantic, Slate.com, Salon.com and numerous other publications. He can be reached at artlevine@inthesetimes.com.