J. Scott Applewhite, Associated Press
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.
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