Obama team draws sharp Hill questions on budget

By Tom Raum

WASHINGTON — President Barack Obama’s $3.8 trillion budget outline drew bipartisan fire on Capitol Hill on Tuesday, with Republicans complaining it doesn’t address deficits soon enough and raises taxes too much. Democrats balked at some of Obama’s spending cuts.

It was a rocky reception for the day-old document, underscoring election-year restlessness and rising public anger at bailouts, bonuses and ballooning deficits. The complaints across party lines suggested it could be difficult for Obama to win support for key parts of his budget, even from members of his own party.

Sen. Bill Nelson, D-Fla., called Obama’s proposal to cancel NASA’s manned moon return program shortsighted. Sen. Patty Murray, D-Wash., derided his proposal to include Army Corps projects in a proposed partial three-year spending freeze. Sen. Jay Rockefeller, D-W.Va., said environmental priorities in the budget would unfairly burden coal states such as his.

Treasury Secretary Timothy Geithner, under grilling by the Senate Finance Committee, said that despite the lively crossfire he could see a bipartisan consensus building that “deficits matter, tax cuts are not free.”

“The American people want to see their leaders coming together and bringing practical solutions” to the problems created by the worst downturn since the 1930s, Geithner said.

In one sign of possible common ground, Senate Finance Committee Chairman Max Baucus, D-Mont., suggested there is support across party lines for Obama’s proposal to give companies a $5,000 tax credit for each new worker they hire in 2010.

“We need to work on legislation that will create jobs. And we need to work across the aisle, so that the legislation on which we work can become law,” Baucus said.

Even so, Obama may not be able to count on one Republican senator who has worked with Democrats in the past. Sen. Olympia Snowe, R-Maine, blasted Obama’s effort to create jobs while proposing higher taxes on families making more than $250,000 a year. Snowe said the tax increase would also hit small businesses, leaving many owners unwilling to start hiring again because of uncertainties over future tax liabilities. “Who is going to take the risk?” Snowe asked.

One contentious area was Obama’s proposal to draw up to $30 billion remaining in the $700 billion bank bailout program, enacted in 2008, to invest in community banks to encourage them to lend to small businesses. Obama promoted the program on Tuesday at a campaign-style appearance in Nashua, N.H.

New Hampshire Republican Sen. Judd Gregg argued that money from the Toxic Asset Relief Program that is left over or repaid by banks is by law supposed to go toward paying down federal debt. “It’s not for a piggy bank because you’re concerned about lending to small businesses,” Gregg told White House Budget Director Peter Orszag.

Orszag replied that the administration was well aware of the provision in the TARP legislation — and that’s why it is seeking legislation to authorize the program.

But separately, Sen. Maria Cantwell, D-Wash., told Geithner the administration shouldn’t wait for legislation to OK such small-business loans, it should just extend the money — as it had done in using TARP funds to help bail out automakers and Wall Street financial giants.

The government “put the screws to the community banks and gave all the money to the big banks. Right now people are cutting lines of credit to small business,” Cantwell complained.

The administration has also proposed a $90 billion tax on big banks over ten years to help recoup losses from the TARP program. Geithner told senators the U.S. might have to extend such a tax — the administration calls it a “fee” — beyond the ten years if bailout costs haven’t been recouped by then.

The Democratic chairman of the Budget Committee, Sen. Kent Conrad of North Dakota, joined Republican Gregg in faulting the administration for not doing enough to stanch the deficit flood.

“I don’t see the focus on bringing down that long-term debt,” Conrad said. Years of deficit spending, aggravated by the recession and two wars, have swollen the national debt to a whopping $12.3 trillion.

While Obama’s economic team was sparring with members of the Senate Finance and Budget committees, his Pentagon team was defending its part of the budget before the Senate Armed Services Committee.

Defense Secretary Robert Gates said the $768.2 billion defense share of the budget would help pay for “a broad portfolio of military capabilities” as it fights wars in Afghanistan and Iraq and help the U.S. “prepare for a much broader range of security capabilities” for the future.

Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, told the panel that the war in Afghanistan is now the Pentagon’s top priority, adding: “The Afghan people are the center of gravity and defeat of al-Qaida the primary goal.”