Charity tax limits upset many

Republicans lined up in opposition, praising Mr. Obama for some cost-cutting in Medicare but arguing he turns around and spends those savings on more government programs.

“I mean, basically, what’s happening here is we’re taking four steps back in the deficit fight, and then we’re only taking two steps forward,” said Sen. Judd Gregg, New Hampshire Republican.

Democrats cheered his plan to return the upper two tax brackets to the levels they were before Mr. Bush’s tax cuts and Mr. Obama’s plans to boost Pell Grants for low-income students to attend college. Republicans said the tax increases will hurt small businesses the most, killing job-creation, and protested making Pell Grants a new entitlement program, meaning Congress could no longer control yearly spending for it.

Mr. Obama’s goal of tackling greenhouse gas emissions may be tougher still. He is counting on raising $645.7 billion over 10 years by auctioning off carbon-emitting permits to polluters, and has given until 2012 before the program has to be up and running.

But cap-and-trade schemes have proved messy in places they’ve been tried, such as Europe, and Mr. Obama has left the details of the plan to be written by Congress, where Republicans may join with Democrats from industrial states to hamper his goal of an 80 percent reduction in emissions by 2050.

Another proposal, permanently indexing the alternative minimum tax for inflation so it doesn’t apply to middle-income earners, is popular with both parties - but so costly that Congress struggles each year to find money to do it.

Mr. Orszag told reporters they understand the challenge, but believe lawmakers will realize there’s no choice.

“I think you’re raising a fundamental question, which is we’re on an unsustainable fiscal course. There’s not a single line in the budget that won’t have someone who cares about it very strongly. And yet, if we allowed all of those lines to persist and grow over time, we would wind up with a fiscal crisis,” he said.

“We recognize that it is difficult to turn direction, to shift direction in the federal budget, but that’s absolutely what we need to do.”