GOP critics hit Obama’s $3.8 trillion budget

Trea­sury Sec­re­tary Tim­o­thy Gei­th­ner tes­ti­fies Tues­day on Capi­tol Hill in Wash­ing­ton before the Sen­ate Finance Com­mit­tee hear­ing on Pres­i­dent Barack Obama’s fis­cal 2013 fed­eral bud­get. (Asso­ci­ated Press | J. Scott Applewhite)

MARTIN CRUTSINGER

AP Eco­nom­ics Writer

WASHINGTON — Trea­sury Sec­re­tary Tim­o­thy Gei­th­ner told Con­gress Tues­day that the president’s new $3.8 tril­lion spend­ing plan would impose new taxes on only 2 per­cent of the nation’s wealth­i­est fam­i­lies and the alter­na­tive would be to seek more painful cuts in other gov­ern­ment pro­grams such as defense, Social Secu­rity and Medicare.

Gei­th­ner defended the new bud­get plan in the face of intense attacks from GOP mem­bers of the Sen­ate Finance Com­mit­tee. Repub­li­can Sen. Orrin Hatch of Utah told Gei­th­ner that the administration’s spend­ing plan would give the coun­try a “per­ma­nently larger, European-inspired government.”

But Gei­th­ner said deeper spend­ing cuts now would dam­age eco­nomic growth and push more Amer­i­cans into poverty at a time when the econ­omy is still strug­gling to recover from a deep recession.

Gei­th­ner told the com­mit­tee that the admin­is­tra­tion hopes to send Con­gress next week a frame­work for mak­ing changes in the country’s cor­po­rate tax structure.

He said the admin­is­tra­tion would not offer detailed leg­isla­tive lan­guage but rather broad prin­ci­ples for cor­po­rate tax reform. He said the admin­is­tra­tion would pro­pose elim­i­nat­ing a num­ber of cur­rent busi­ness tax breaks in an effort to lower the cor­po­rate tax rate.

The nom­i­nal U.S. cor­po­rate tax rate is 35 per­cent, the high­est in the world after Japan, but few com­pa­nies pay that much after tak­ing var­i­ous deductions.

Obama has pro­posed low­er­ing that tax rate but has not said by how much it should be low­ered. The pres­i­dent has also pro­posed end­ing tax breaks for U.S. com­pa­nies mov­ing jobs or prof­its to for­eign coun­tries while sug­gest­ing tax breaks for busi­nesses that move jobs back to the United States.

Gei­th­ner did not offer any hints about what rec­om­men­da­tions the admin­is­tra­tion will make on cor­po­rate rates in its sub­mis­sion to Congress.

Con­gress may put off the tough deci­sions on the bud­get until after the Novem­ber elec­tions, but the spend­ing doc­u­ment will cer­tainly be used as a cam­paign doc­u­ment for Obama and a key tar­get for Repub­li­cans run­ning against Democrats.

Repub­li­can Mitt Rom­ney, who is cam­paign­ing for the GOP nom­i­na­tion to chal­lenge Obama in the fall, called the bud­get Obama released Mon­day “an insult to the Amer­i­can tax­payer.” GOP can­di­dates Rick San­to­rum, Newt Gin­grich and Ron Paul are all advo­cat­ing big­ger spend­ing cuts to con­trol the deficits, and all the GOP can­di­dates oppose Obama’s tax increases.

“The president’s bud­get is a gloomy reflec­tion of his failed poli­cies of the past, not a bold plan for America’s future,” House Speaker John Boehner, R-Ohio, said Mon­day after the bud­get was released. “The pres­i­dent offered a col­lec­tion of rehashes, gim­micks and tax increases that will make our econ­omy worse.”

Repub­li­cans are argu­ing for deeper spend­ing cuts and a frontal assault on the biggest dri­vers of the deficit, the soar­ing costs of Medicare and Med­ic­aid, whose already siz­able costs are pro­jected to dou­ble in future years as baby boomers retire.

Rep. Paul Ryan, R-Wis., chair­man of the House Bud­get Com­mit­tee, said Mon­day that he expected the Republican-controlled House would in com­ing weeks pass an alter­na­tive to the Obama bud­get that would gain con­trol of the deficit, not by rais­ing taxes but by cur­tail­ing Medicare and Medicaid.

“Pres­i­dent Obama’s irre­spon­si­ble bud­get is a recipe for a debt cri­sis and the decline of Amer­ica,” Ryan said.

Obama’s cuts in Medicare and Med­ic­aid avoid cuts in ben­e­fits and instead make mod­est trims in pay­ments to health care providers. In con­trast, the Repub­li­can House last year approved Ryan’s plan, which would essen­tially trans­form Medicare into a voucher sys­tem in which future seniors would get a fixed amount to buy med­ical insurance.

The Obama bud­get pro­poses spend­ing $3.8 tril­lion in the 2013 bud­get year, which begins Oct. 1. It would achieve $4 tril­lion in deficit cuts in part through restrain­ing the growth of many gov­ern­ment pro­grams, adher­ing to the agree­ment Con­gress approved in August for spend­ing caps to achieve $900 bil­lion in deficit reduc­tion over a decade.

Obama’s plan also pro­poses addi­tional deficit reduc­tion in order to avoid $1.2 tril­lion in across-the-board cuts sched­uled to take effect next January.

But the pres­i­dent relies on $1.5 tril­lion in tax increases, mainly by allow­ing the Bush-era tax cuts to expire on fam­i­lies mak­ing more than $250,000 per year, impos­ing addi­tional taxes on those mak­ing more than $1 mil­lion per year and elim­i­nat­ing var­i­ous cor­po­rate tax breaks.

The tax increases all have been rejected by Republicans.

With both par­ties hold­ing entrenched posi­tions, it is very likely that no solu­tion will be found before the Novem­ber elec­tions, with both sides pre­fer­ring to use the debate to score polit­i­cal points.

If that occurs, Con­gress will prob­a­bly be back in Wash­ing­ton after the Novem­ber elec­tions for a lame-duck ses­sion to resolve the bat­tle over taxes and spend­ing cuts.

Law­mak­ers are fac­ing end-of-the-year dead­lines when the Bush-era tax cuts on all tax­pay­ers expire and across-the-board spend­ing cuts will go into effect if law­mak­ers can’t agree on $1.2 tril­lion in fur­ther deficit reduc­tion over the next decade.

Posted by AP News on Feb 14 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.