Treasury Secretary Timothy Geithner strongly defended the Obama Administration’s $3.55 trillion budget on Tuesday, saying the current economic crisis warrants aggressive spending and justifies a huge potential deficit.
Geithner said the nation’s “critical long-term priorities” -- defined by the administration as health care, education and renewable energy sources -- have been neglected and must be addressed if the U.S. is to fully recover from the damage inflicted by the current recession.
"Unless we move aggressively, the cost of the crisis will be much more damaging," Geithner said in testimony before the House Ways and Means Committee.
Geithner said the Obama Administration inherited “the worst fiscal situation in American history,” and that the current recession is “deeper and broader … than we have seen in generations.”
The secretary said U.S. banks may need more than the $700 billion in bailout funds already earmarked in their direction, and he asked Congress for its support in determining the "appropriate size and shape" of any additional rescue plans.
Criticism of Obama's 2010 budget proposal included arguments that the plan's tax policies hurt small businesses.
Geithner said Obama administration policies, including the recently passed stimulus package, will save or create at least 3.5 million jobs in the next two years.
“This is a pro-growth budget and is very fair to working families,” Geithner said.
One issue Geithner addressed repeatedly was the economic assumptions underpinning the $3.5 trillion deficit, which some private economists and Republicans have called too optimistic.
The Obama Administration predicted in their 2010 budget that the nation’s unemployment rate will peak at 8.1% and the nation’s gross domestic product will fall 1% during the year.
However, the Federal Reserve has an unemployment rate running 8.5% to 8.75%, while some private economists have unemployment rising above 9%.
Geithner defended the administration’s economic assumptions, saying the White House used “realistic forecasts” and that their budgetary estimates were “within the range” of what the Congressional Budget Office and private economists estimated.
“We will look at this with a cold set of eyes,” he said.
Geithner predicted that the economy will have recovered by 2011.
In response to questions from committee members, Geithner said now is not the right time to consider cutting the deficit. Trying to reduce the deficit in a period of economic stagnation would do more harm to the nation’s economy than good, he said.
Geithner also faced questions about his earlier tax troubles, which nearly derailed his nomination. The Ways and Means Committee writes U.S. tax law.
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