Treasury Secretary Tim Geithner Defends Obama's 3.8T Budget

By Dan Robinson

February 3, 2010

Obama administration officials appeared before key congressional committees on Tuesday, defending the $3.8 trillion spending proposal that the president wants Congress to approve for the 2011 fiscal year.

Treasury Secretary Tim Geithner

The budget blueprint was subjected to tough questions from Democrats and Republicans in the House of Representatives and the Senate.

Treasury Secretary Tim Geithner bore the initial brunt of criticism by opposition Republicans on the Senate Finance Committee.

Noting that the country faces great fiscal perils, he contrasted the U.S. economy a year ago with the progress that has been made since, highlighting recent news of growth.

Geithner said the president's budget promotes government efficiency as well as job creation and business innovation. "This budget is designed to help make sure that Washington is creating the conditions that allow the private sector to grow and expand, to allow businesses small and large to create jobs and make investments," he said.

Republicans such as Senator Chuck Grassley renewed their assertion that the president's budget, with its projected $1.56 trillion deficit, will bring unsustainable expansions of the national debt. "Over the past year, with the levers of power all concentrated in the hands of those on the other side, we have seen the fiscal path worsen. Deficits as you see are up, and debt is up," he said.

Grassley said Democrats and Republicans must have an "intellectually honest" discussion and recognize that that both parties bear responsibility for current deficits.

Saying that the U.S. economy faces daunting challenges, Finance Committee chairman, Democrat Max Baucus, urged Republicans to work with Democrats in the weeks ahead. "We need to work on legislation that will create jobs and we need to work across the aisle, so that legislation on which we work can become law," he said.

In separate congressional testimony, Geithner and Office of Management and Budget Director Peter Orszag stressed the importance of bringing spending deficits down as measured against Gross Domestic Product.

In the house of representatives, Orszag told the Committee on the Budget that the Obama administration hopes to reduce the deficit over 10 years, using a variety of measures including ending tax cuts and freezing non-security spending. "The budget embodies, even not counting the winding down of the wars in Iraq and Afghanistan, $1.2 trillion in deficit reduction, more deficit reduction than embodied in any administration budget in more than a decade," he said.

Budget Committee chairman, Democrat John Spratt said President Obama inherited a crushing economic situation and was forced to take steps to respond to a recession that began in 2007 under former President George W. Bush. "Within weeks of taking office, his [President Obama's] administration and Congress launched a massive supplemental to get this economy moving again. The recovery act added to the short-term deficits, then estimated at $1.3 trillion to $1.2 trillion [and] the deficit was already swollen by the recession and by the Bush administration's own budgets and bailouts," he said.

President Obama has received substantial pushback from members of his own party who want to reduce defense spending.

In formally presenting a $708-billion request, Defense Secretary Robert Gates said the Pentagon is committed to continuing a process of changing the way it does business. "Continued reform, fundamentally changing the way this department does business, the priorities we set, the programs we fund, the weapons we buy and how we buy them," he said.

On top of its main budget request, the Defense Department is seeking an additional $33 billion for the current fiscal year to support President Obama's strategy for Afghanistan, and the deployment of 30,000 additional U.S. troops.

The chairman of the House Armed Services Committee, Missouri Democrat Ike Skelton, said this week that Congress must ensure that money spent on defense is used wisely and that spending is "reined in" where possible.