WASHINGTON - Republicans and Democrats squared off Tuesday over President Barack Obama's $3.8 trillion budget proposal, which is fast becoming a major issue in the 2012 presidential campaign.
A top Obama lieutenant, Treasury Secretary Timothy Geithner, told Congress that the plan would impose new taxes on just 2 per cent of the nation's wealthiest families. The alternative, he said, would be more-painful cuts in government spending programs such as defence and retirement programs for the elderly.
Republican members of the Senate Finance Committee countered that the budget proposal smacked of big government. Republican Sen. Orrin Hatch told Geithner that the administration's would give the country a "permanently larger, European-inspired government."
Obama's proposal has almost no chance of being approved by Congress, where Republicans control the House of Representatives. Tough decisions on the budget likely will be put off until after the November elections, but the spending plan will certainly be used as a campaign document for Obama and a key target for Republicans.
The race to select a Republican to challenge Obama in November has become very close, with new polls showing that Rick Santorum, coming off a stunning sweep of three caucus states last week, has pulled even with Mitt Romney, the presumed front-runner in the race.
Romney, the former Massachusetts governor, called the budget Obama released Monday "an insult to the American taxpayer."
Santorum, a former Pennsylvania senator; Newt Gingrich, former speaker of the U.S. House; and Texas Rep. Ron Paul are all advocating bigger spending cuts to control the deficits.
All of the Republican candidates oppose Obama's tax increases.
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, which are health programs for the elderly and the poor.
The Obama budget proposes spending $3.8 trillion in the 2013 budget year, which begins Oct. 1.
Geithner on Tuesday 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 Senate 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 per cent, 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.
