Administration Will Not Tell Fiscal Commission to Avoid Tax Hikes on Incomes Below $250,000

By Fred Lucas | February 1, 2010 | 7:18 PM EST

Peter Orszag, director of the White House Office for Management and Budget (AP Photo)

Washington ( – President Obama’s budget director would not say whether the administration will recommend that taxes not be raised on Americans earning less than $250,000 annually. A fiscal commission, which has not yet been assembled, is expected to review ways to reduce the federal deficit.

Such an increase would violate the president’s campaign pledge to hike taxes only on higher income earners.

“We’ve been clear on our position on taxes, but we have to let the commission – it hasn’t even been formed yet – let’s let it do its work,” said Peter Orszag, director of the Office of Management and Budget (OMB).

President Obama last week signed an executive order to assemble a bipartisan commission that would review ways to reduce the federal deficit.

The $3.8 trillion budget proposal that the president submitted to Congress on Monday increases taxes by letting the Bush tax cuts expire in 2011 for those making more than $250,000. Letting the Bush tax cuts lapse would bring in about $2 trillion in revenue over 10 years, the administration projects.  

The president’s fiscal year 2011 budget proposal also includes a three-year spending freeze on discretionary spending, despite a 20 percent increase in discretionary spending for fiscal year 2010.

Further, the budget aims to reduce the deficit to four percent of the gross domestic product by 2014, but it increases spending on education, green energy projects and tax credits for small businesses to hire new workers.

The federal deficit this year is projected to be $1.6 trillion, or about 10.6 percent of the GDP.

“We do face substantial medium term deficit problem,” Orszag said. “We put forward proposals to get us part of the way there. The commission will have to get us the rest of the way there. We’ve been very clear on our stance on taxes, and frankly on other spending proposals. The commission hasn’t even been yet named. Let’s let it do its work and see what it can come up with.”

Obama wanted a bipartisan congressional panel to seek ways to reduce the deficit, but the proposal died in the Senate last week with both Republicans and Democrats voting against the bill. A congressional panel could have forced Congress to consider unpopular decisions such as making cuts to Social Security, Medicaid or Medicare.

“Changing spending-as-usual depends on changing politics-as-usual, and that’s why I’ve proposed a bipartisan fiscal commission -- a panel of Democrats and Republicans who would hammer out concrete deficit reduction proposals over the medium and long term, but would come up with those answers by a certain deadline,” Obama said.

In the country’s current fiscal mess, more bold actions should be taken, said Sen. Judd Gregg (R-N.H.), ranking member of the Senate Budget Committee.

“These circumstances call for a bold, game-changing budget that will turn things around, put in place a plan to restrain spending, reduce the debt and tackle the big entitlement programs that are growing out-of-control,” Gregg said in a statement.

“Instead, the president has sent us more of the same – a budget that claims to be fiscally responsible, but just below the surface contains more spending, more borrowing and more taxes. After a year in office that has put us on a pace to double the debt by 2013, the president should have a tougher plan to address our fiscal crisis, because this budget will solve nothing,” Gregg added.

Obama laid much of the blame for the deficit on the Bush administration.

“The fact is, 10 years ago, we had a budget surplus of more than $200 billion, with projected surpluses stretching out toward the horizon,” Obama said.

“Yet over the course of the past 10 years, the previous administration and previous Congresses created an expensive new drug program, passed massive tax cuts for the wealthy, and funded two wars without paying for any of it – all of which was compounded by recession and by rising health care costs.  As a result, when I first walked through the door, the deficit stood at $1.3 trillion, with projected deficits of $8 trillion over the next decade,” he added.

But Rep. Tom Price (R-Ga.), chairman of the Republican Study Committee, said a look at the numbers does not demonstrate a responsible budget.

“It’s astounding to hear the president talk about fiscal sanity but then turn around and propose the largest budget deficits in history,” Price said in a statement. “While the free-spending social democracies of the European Union are required to keep their debt below 60 percent of GDP, President Obama’s proposed budget would increase our own debt to 77.2 percent of GDP just ten years from now.”

“And as if record deficits weren’t enough, President Obama’s budget still includes major tax increases that will hit our fragile economy like a brick wall,” Price continued. “The last thing American small businesses need is a tax hike, but the President just announced he’s coming after their bottom line. This remarkable lack of understanding of what makes our economy grow is exactly what is preventing job creation.”