Image: Orzag
Chip Somodevilla  /  Getty Images
Office of Management and Budget Director Peter Orzag prepares to testify before the House Budget Committee in Washington, D.C.
updated 3/3/2009 4:01:52 PM ET 2009-03-03T21:01:52

President Barack Obama's top economic officials on Tuesday vigorously defended the administration's $3.6 trillion budget against Republican claims that it contained overly optimistic economic assumptions and included stealthy tax increases that could end up hitting most Americans.

Treasury Secretary Timothy Geithner and White House Budget Director Peter Orszag, in separate appearances on Capitol Hill, stuck to the administration line that the president's budget would benefit 95 percent of working Americans.

Higher taxes for affluent Americans would not come until 2011 once "we are safely into recovery," Geithner told the tax-writing House Ways and Means Committee.

"I'm confident this is the right path for the country," Geithner said.

GOP criticism
But Republicans argued that the portion of the budget that would require polluters to purchase permits from the government for their greenhouse gas emissions would essentially impose huge new energy costs on all consumers and businesses.

"The president's budget increases taxes on every American, and does so during a recession," Rep. Dave Camp, R-Mich., told Geithner.

Camp also complained about provisions that would limit the size of charitable deductions that could be taken by families earning more than $250,000 a year.

But Geithner defended the overall proposal, saying far more people would benefit from lower taxes under the plan. He said the budget reflects what Obama viewed as "a deep moral imperative to make our society more just. But it's very good economic policy too. It will mean there is again a fairer, more equitably shared tax burden on the vast majority of Americans."

Orszag faced similar questioning before the House Budget Committee.

"The new administration has inherited an economic crisis unlike any we have seen in our lifetimes," Orszag said in defending the spending and tax levels of the budget.

Video: Obama, Brown to discuss economy Too optimistic?
Some lawmakers challenged the economic projections contained in the budget as far too optimistic.

  1. Other political news of note
    1. Animated Boehner: 'There's nothing complex about the Keystone Pipeline!'

      House Speaker John Boehner became animated Tuesday over the proposed Keystone Pipeline, castigating the Obama administration for not having approved the project yet.

    2. Budget deficits shrinking but set to grow after 2015
    3. Senate readies another volley on unemployment aid
    4. Obama faces Syria standstill
    5. Fluke files to run in California

The budget forecasts that the economy, as measured by the gross domestic product, would only shrink by 1.2 percent this year and then snap back and grow by a solid 3.2 percent in 2010, followed by several years of annual growth of over 4 percent.

That's more optimistic than most private forecasts, and comes despite a new government report showing the economy contracted by 6.2 percent in late 2008, far more than the 3.2 percent drop first reported.

"It looks like somebody's cooking the books," Rep. Kevin Brady, R-Texas, told Geithner.

"It does predict a somewhat more rapid recovery" than other forecasts, Geithner acknowledged. But, he added, "I believe this is a realistic forecast," even if it does come at a time of a still-deepening recession.

He promised the administration would "look at this with a cold, hard set of eyes" when it revisits its assumptions at a later point.

Geithner also said the administration will unveil a series of rules and measures in the coming months to limit the ability of international companies to avoid U.S. taxes.

Obama and his top aides have been promoting the budget package since unveiling an outline last week, but Tuesday provided lawmakers their first opportunity to publicly question top officials over details.

Questioning was pretty much along party lines. Democrats for the most part praised Obama's proposal.

"It is making the tax code more fair," Rep. John Lewis, D-Ga., told Geithner.

Obama's budget faces a difficult path through Congress because of its many controversial proposals on health care, taxes and global warming.

Obama wants to reduce the emissions blamed for global warming by auctioning off carbon pollution permits. The proposal, known as cap and trade, is projected to raise $646 billion over 10 years.

Most of the money would be used to pay for Obama's "Making Work Pay" tax credit, which provides up to $400 a year to individuals and $800 a year to couples. The plan also would raise money for clean-fuel technologies, such as solar and wind power.

"This massive hidden energy tax is going to work its way through every aspect of American life," Rep. Dave Camp of Michigan, the top Republican on the Ways and Means Committee, told Orszag. "How we light our homes, heat our homes and pay for the gas in our cars, in every phase of our daily lives, we will be paying higher costs."

Orszag acknowledged that the energy proposal would increase costs for consumers, but argued that the vast majority of consumers will get tax breaks elsewhere in Obama's budget package.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


Discussion comments


Most active discussions

  1. votes comments
  2. votes comments
  3. votes comments
  4. votes comments