Geithner, Orszag defend Obama spending plan

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By David M. Dickson and Sean Lengell

Administration officials responded Tuesday to Republican criticism of the tax and spending proposals in President Obama's budget blueprint.

“The president's budget increases taxes on every American and does so during a recession,” said Rep. Dave Camp of Michigan, ranking Republican on the House Ways and Means Committee. “What the president gives, he more than takes away in his new energy taxes.”

Treasury Secretary Timothy F. Geithner said that 95 percent of Americans would receive a tax break if the president's $3.6 trillion budget for next year is adopted. Only the wealthiest 5 percent eventually would face higher taxes, he said.

“If you look in the past, we've had this long trend of inequality,” Mr. Geithner told Congress. “What the president is proposing to do is bring more fairness to the tax code.”

The tax debate centers mostly on the president's cap-and-trade program for carbon emissions, which would allow companies to emit those emissions up to a certain level and then charge them $20 per ton of gasses emitted above that cap. The money generated from the program would help pay for Mr. Obama's middle-class tax cuts and investments in renewable energy.

Republicans say the cap-and-trade plan would lead to higher fuel prices, thus creating a de facto tax on every American. They add that a nation struggling with a major recession is in no shape to handle the burden of new taxes.

Mr. Geithner said the cap-and-trade plan is essential to reducing the nation's dependency on foreign oil.

“If people don't change how they use energy, then they will face higher costs for energy,” he said.

Mr. Geithner said higher taxes for affluent Americans - families making more than $250,000 - would not come until 2011, when the country is “safely in recovery.”

White House budget director Peter Orszag tangled with Republican members of the House Budget Committee over tax increases, entitlement reform, economic forecasts, earmarks, budget deficits and the national debt.

However, even Budget Committee Chairman John M. Spratt Jr., South Carolina Democrat, expressed disappointment over the trend in the budget deficit after Mr. Obama's four-year term ends. From a projected 2009 shortfall of $1.75 trillion, the deficit declines until it reaches $533 billion in 2013. But then the deficit begins rising, exceeding $700 billion in 2019.

"We want to see the deficit decline [after 2013],” Mr. Spratt said.

Mr. Orszag repeatedly emphasized the importance of reducing escalating health care costs.

“Reasonable projections of health care cost growth under current policies show that they are the central cause of the nation's long-term fiscal imbalance,” Mr. Orszag said. “Health care is the key to our nation's fiscal future, and health care reform is entitlement reform.”

Ranking committee member Rep. Paul D. Ryan accused the administration of a budget “power play” that represented “an incredible gamble with the U.S. economy.” The Wisconsin Republican attacked the 10-year blueprint for doubling the national debt within eight years and never coming close to balancing the budget, “even with its rosy scenario” for the economy.