By Peter Schroeder - 02/14/12 06:18 PM EST
Treasury Secretary Timothy Geithner told skeptical Republican senators Tuesday that it is simply not possible to correct the nation’s fiscal problems without raising taxes.
Geithner defended President Obama’s 2013 budget proposal before the Senate Finance Committee and said the plan is the only option he sees for helping the economy and addressing the deficit without hurting the middle class.
"I do not see how you get there if you are unable ... to contemplate and to embrace modest increases in revenue through tax reform," Geithner said. "I just don’t think it’s possible."
"It is clear that [Obama's] plan would only make our fiscal problems worse and harm our economy by imposing around $1.9 trillion of stifling tax hikes," said Sen. Orrin Hatch (R-Utah), the ranking member of the panel.
"This budget is a plan for a permanently larger, European-style government. It does not set our country down a sustainable fiscal path. It does nothing to change the President’s unwavering devotion to tax-and-spend policies and failed stimulus schemes that have and will continue to generate historic deficits and levels of debt," Hatch said.
Geithner argued the deficit can’t be tamed without tax hikes and said that cost should fall on wealthy households.
"We do not believe there is a feasible way or a fair way to restore fiscal sustainability without asking a very small fraction of the most fortunate Americans to bear a modestly higher burden for the privilege of being Americans," Geithner said.
The president's budget proposal included a number of tax increases targeting the wealthy, including higher taxes on investment dividends and capital gains. The president also called for Congress to enact the "Buffett Rule," ensuring millionaires pay at least 30 percent of their income in taxes, although it was not officially included in the budget proposal.
Geithner also sought to rebut claims that Obama's budget would harm the economy. GOP lawmakers blasted the president's proposal Monday, arguing it would lead to economic ruin and a debt crisis on par with that in Greece.
Obama's top economic official acknowledged that the economy still is shaking off the recession, but said the nation is on solid footing and would be in even better shape if lawmakers adopted the White House budget.
"If those were embraced by Congress tomorrow ... there would be substantially more confidence around the world," he said. "I don't believe there is a credible argument to make that uncertainty about our fiscal deficits ... is having a material adverse effect on the American economy."
Geithner also had to fend off questions from multiple lawmakers in both parties about why the White House does not plan to offer a comprehensive tax reform proposal. He said the White House planned to offer a "framework" for corporate tax reform in the coming weeks, but no new efforts on overhauling the individual tax code.
When asked why the White House was not interested in even offering a plan this year, Geithner said the failed attempt by Obama and House Speaker John Boehner (R-Ohio) to strike a broad deal this summer proved the two sides were too far apart on the issue right now.
"We took a run at trying to negotiate a framework like that with the Republican leadership in the House over the course of the summer," he said. "We found no basis for agreement on even the broad framework. ... We're just trying to be realistic."