BLBG: Geithner: Cutting Spending Too Much Would Hurt U.S.
Spending cuts in the Obama administration’s fiscal 2013 budget plan should be phased in gradually to protect the economic recovery, U.S. Treasury Secretary Timothy F. Geithner said.
“Cutting spending too deeply or too soon would damage the economy in the short term, impede our ability to make necessary investments for long-term growth, and achieve deficit reduction at the expense of the most vulnerable Americans,” Geithner said in testimony today before the Senate Finance Committee.
Geithner reiterated the administration’s calls for high- earning Americans to pay more in taxes.
“The wealthiest 2 percent” must contribute more “to correct the imbalance in our system,” he said. President Barack Obama called for $1.4 trillion in fresh revenue from Americans at the top of the income scale, proposing higher taxes for wages and investments and limiting breaks for retirement savings and health insurance.
Max Baucus, a Montana Democrat who is chairman of the Senate panel holding the hearing, endorsed Obama’s proposal for permanent extensions of expiring tax cuts. He also called for overhauling the U.S. tax code.
‘More Predictable’
“We must make the tax code fairer and more predictable,” he said. “We need to simplify it and close loopholes.”
Baucus said the administration’s cuts to rural assistance programs are “too deep” and could “paralyze our ongoing economic recovery.”
The tax proposals in the administration’s budget plan, released yesterday, were immediately rejected by business groups and some congressional Republicans, who said the ideas are part of Obama’s re-election strategy and gave them little chance of advancing into law in 2012.
Senator Orrin Hatch, the committee’s top Republican, said the Obama budget would impose “stifling tax hikes” that would harm the economy.
“This budget is a plan for a permanently larger, European- style government,” he said. “It does not set our country on a sustainable fiscal path.”
At the hearing, Geithner called on Congress to extend the payroll tax cut and emergency unemployment compensation, both of which are set to expire at the end of the month. If these programs aren’t extended, they will “shave about half a percentage point” off the U.S. gross domestic product this year, Geithner said, citing private-sector economists.
To contact the reporters on this story: Richard Rubin in Washington at rrubin12@bloomberg.net; Ian Katz in Washington at ikatz2@bloomberg.net
To contact the editors responsible for this story: Chris Wellisz at cwellisz@bloomberg.net; Jodi Schneider at jschneider50@bloomberg.net
