Treasury Secretary Jack Lew warned Congress on Tuesday against taking drastic austerity measures to lower the nation’s ballooning debt, saying the federal government also must spend money on job growth-related programs for the economy to fully recover.
Mr. Lew, defending President Obama’s budget plan before the House and Senate budget committees, said immediate efforts to strengthen the economy — along with medium- and long-term efforts to lower the debt and deficit — are vital because “families across the country are still struggling.”
“As this budget shows, we do not have to choose between the two, and indeed, we must not,” the secretary told the House panel. “We can adopt a powerful jobs and growth plan even as we embrace tough reforms to stabilize our finances.”
Mr. Obama last week sent his fiscal 2014 budget to Congress — a $3.77 trillion spending plan that would raise hundreds of billions in revenue by closing loopholes and raising taxes on smokers and the wealthy. It also calls for entitlement program cuts the administration previously resisted.
The president claims $1.8 trillion in deficit savings over the next decade, although the administration’s budget charts show the savings would be $1.4 trillion. About $1.2 trillion of that is devoted to reversing the automatic, across-the-board “sequester” spending cuts required because Washington failed to follow up on a 2011 budget deal with further deficit-reduction action.
House Budget Committee Chairman Paul Ryan, Wisconsin Republican, argued it’s impossible for the president’s plan to meet its goals without also taxing middle-income wage earners.
“If you want to get all this kind of tax revenue you’re talking about, it doesn’t just come from the movie star or the hedge-fund manager,” Mr. Ryan said. “It does, from your own budget’s acknowledgment, come from middle-income people, lower-income people.”
Mr. Ryan also complained the president’s plan would cut the top corporate tax to 28 percent from 35 percent, while small businesses would pay up to 39.6 percent.
“That, in our opinion, is unfair,” he said. “It hurts jobs.”
The Obama budget projects that debt, calculated as a percentage of the economy, will stabilize by the end of the decade but never balance in that span. By contrast, Mr. Ryan’s budget plan does come into balance in 10 years, and begins to lower the government’s debt burden.
Rep. Chris Van Hollen of Maryland, the senior Democrat on the budget panel, said Mr. Ryan’s budget plan dangerously focuses on austerity measures over spending initiatives.
“The [independent] Congressional Budget Office projects that three quarters of the fiscal year 2014 deficit is due to slow employment levels, underemployment in the economy. So we need to be focused on that right now rather than pursuing European-style austerity in the budget, as our Republican colleagues’ budget does,” he said.
Mr. Lew said Mr. Obama made significant concessions to Republicans when drafting the budget, saying it incorporates “all elements” of the president’s offer to House Speaker John A. Boehner during negotiations in December to avoid the “fiscal cliff.”
“This framework does not represent the starting point for negotiations but it represents a fair balance between tough entitlement savings and additional revenues from those with the greatest incomes,” Mr. Lew said.
Mr. Obama’s concessions include a proposal to change the way Social Security’s cost-of-living adjustments are calculated. Some Democrats have pushed back at the so called “chained-CPI” policy, saying it would lead to smaller Social Security payments to many seniors.