Video: Budget will 'leave our economy stronger'

updated 3/12/2009 2:13:52 PM ET 2009-03-12T18:13:52

President Barack Obama's ambitious spending blueprint faced bipartisan skepticism Thursday as senators questioned the administration's long-term budget outlook and the deficits it envisions rising in the middle of the next decade.

Treasury Secretary Timothy Geithner told the Senate Budget Committee that current spending increases are short term and will have to be reduced substantially to get the country back into financial shape.

But the committee chairman, Sen. Kent Conrad, said the track of future deficits was "unsustainable." He singled out Obama's proposal for spending $634 billion on health care over the next 10 years.

"Some of us have a real pause about the notion of putting substantially more money into the health care system when we've already got a bloated system," said Conrad, D-N.D.

Sen. Judd Gregg, R-N.H., complained that the budget does not tackle rising spending on Social Security and Medicare. Geithner said the administration intends to confront higher health care costs with broad changes that will lower Medicare spending.

Geithner is at the center of Obama's economic policy, advocating for its budget proposals and tax policies, as well as a $700 billion rescue program for the financial sector.

Geithner faced questions on all those fronts before heading to London for talks Friday and Saturday with finance officials from the Group of 20 nations.

Geithner resisted pressure from Gregg for specifics of the Treasury's proposed new public-private partnership fund to help banks clear their books of toxic, mortgage related assets that have led to a credit freeze.

Details are not expected for a few weeks, but it is known that the plan would aim to provide total financing of $1 trillion. Geithner hinted at the possibility the program would require more money beyond the existing $700 billion financial rescue fund. "We certainly can start with the resources we have," he said.

Obama's budget would raise taxes, starting in 2011, on individuals earning more than $200,000 and on households earning more than $250,000. Geithner said the increases would kick in after the economy is expected to be in recovery.

But Geithner sidestepped a question by Sen. Mike Crapo, R-Idaho, about whether the administration would let the increases take effect if the economy has not recovered in two years. "We have to watch how the economy evolves," Geithner said.

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At the White House, the administration conferred with state officials about how the $787 billion in stimulus money will go out. Meanwhile, House Speaker Nancy Pelosi, D-Calif., played down suggestions this week that Democrats would consider a second economic stimulus bill.

"I know that people have made suggestions that we should be ready to do something, but I really would like to see this stimulus package play out," Pelosi said. "It's just not something that, right now, is in the cards," she added later.

Vice President Joe Biden opened the White House meeting by warning state officials that if they misuse money from the stimulus package, they should not expect more help from the federal government for a long time.

"If we don't get this right, folks, this is the end of the ability to convince Congress that anything should go to the states," Biden said.

Added Obama: "If we see money being misspent, we're going to put a stop to it."

The conference was billed as a way for state officials to propose and discuss ideas for spending the money, as well as to hear from several Cabinet secretaries and other administration officials.

Obama told the state officials they were "at the front lines of what is probably the most important task that we have in this country over the next couple of years and that is getting the economy going again."

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

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