WASHINGTON – Treasury Secretary Jack Lew lauded President Obama’s proposed 2016 budget before the House Ways and Means Committee as a giant step forward for “middle-class economics” that carries the additional benefit of cutting the nation’s deficit over the next 10 years.
Lew told lawmakers the $3.99 trillion spending package promotes economic growth, stimulates job creation and expands economic opportunity.
“This budget is practical, not partisan, and it provides a comprehensive and balanced approach to the realities we face,” Lew said. “It invests in long-term growth while also building on the progress that has already been made to ensure a sustainable path for the debt and deficit.”
The proposal, Lew said, is a “credible, common-sense plan that makes hard choices. It focuses on middle class economics that will help drive growth, create jobs and expand opportunity for all Americans, unlocking a brighter future for future generations.”
Obama administration policies are working, Lew said, noting that the economy “appears to have entered a period of self-sustaining growth.”
“The economy grew 2.5 percent last year,” he said. “Private sector forecasters expect the economy will grow roughly 3 percent this year, while the International Monetary Fund recently revised its U.S. growth estimate higher, expecting 3.4 percent growth in 2016. This is substantially faster than all of the other advanced economies combined.”
But Rep. Paul Ryan (R-Wis.), the committee chairman who accused the administration of engaging in “envy economics” with its latest budget plan, told Lew that he was “pretty disappointed in this proposal” and immediately indicated that several White House spending proposals were non-starters.
One area that won’t receive serious consideration, Ryan said, are plans to increase taxes over the next 10 years by raising the capital gains tax and implementing new levies on corporate profits overseas. Smokers also get hit, seeing the cigarette tax go from $1.01 a pack to $1.95.
“You’ve raised taxes by $1.7 trillion over the past six years and now you want to raise them again — by $2.1 trillion,” Ryan said. “You want to tax savings and investment and small businesses. So, another budget, another call for higher taxes. And I want to take this opportunity to make something clear: We are not raising taxes on the American people. They’re working harder than ever to get ahead. And they deserve a break, not another tax hike.”
Even with the tax hikes, Ryan said, Obama’s proposal fails to balance the budget within 10 years “because you don’t get spending under control.”
Whiles it’s true that the package doesn’t balance out anywhere in the near future, Lew acknowledged, it “makes needed investments in key priorities while maintaining a responsible fiscal course,” making significant headway in cutting the deficit.
“The president’s budget achieves $1.8 trillion of deficit reduction over 10 years, primarily from much needed reforms to our health, tax, and immigration systems,” Lew said. “Under this budget, deficits decline to about 2.5 percent of GDP over the 10-year budget window, down 75 percent from the Great Recession peak of 9.8 percent of GDP.”
At the same time, Lew said, the White House proposal establishes that “investing in growth and opportunity go hand in hand with putting the nation’s finances on a strong and sustainable path.”
“The president strongly believes that now is the time to invest in America’s future in order to drive inclusive economic growth and opportunity, secure the nation’s safety and put the nation’s finances on the road to a more sustainable fiscal outlook. We believe our budget does just that.”
Despite the differing assessments, Ryan noted that there are areas of potential compromise – even agreement – between the White House and the Republican-led Congress.
“The first thing that comes to mind is trade,” Ryan said. “We all agree that trade is good for America because more trade means higher pay. And so my top priority is putting in place trade promotion authority. To get the best trade deals possible, we have to be in the best position possible and that’s what TPA will do.”
Lew agreed, asserting that trade promotion authority – which provides for an up-or-down vote on administration-negotiated trade pacts without amendments — creates a “level playing field for our businesses and workers.”
The administration, Lew said, views trade as “another important component of our strategy to grow the economy and strengthen the middle class.”
“Exports account for a significant portion of our economic growth over the course of the last four years and ninety-eight percent of our exporters are small businesses,” he said. “Expanding the reach of America’s exports will create new opportunities for our small businesses to grow.”
Ryan also expressed a desire to address the nation’s tax code. The administration also has expressed such a desire but the White House and Congress look to be on different wavelengths. The chairman told Lew “we need to fix our tax code for everybody. And with this administration, I don’t have high hopes.”
“But you have gradually, grudgingly taken a few steps in the right direction, though you need to move further still,” Ryan said. “For years you talked about fixing the tax code for corporations, but not for families and small businesses. More recently, after this committee’s constant insistence that tax reform couldn’t give an unfair advantage to big, public companies over closely held, family-owned businesses, you finally talked about helping small business too — even though your specific proposals so far have been inadequate. And now the administration is taking a few more baby steps in our direction by proposing a few ways to simplify the tax code for middle-class families.”
“So, progress — not much — but I’ll take it,” Ryan said.
Lew expressed a desire to “simplify and improve our tax code to make the paychecks of working families go further, ensure the wealthiest pay their fair share, and fix our broken business tax system in order to promote long-term growth and broad-based prosperity while using one-time transition revenue to pay for much needed investments in our nation’s infrastructure.”
The key to reform, Lew asserted, was in addressing the nation’s corporate tax structure.
“I continue to believe the best way to achieve reform today is to start with pro-growth business tax reform that protects and strengthens the middle class, lowers rates, simplifies the system, levels the playing field and eliminates unfair and inefficient loopholes,” he told the panel.