Conservative Congressmen Hammer Geithner Over Obama's Planned Tax Hikes, Cap-and-Trade

By Matt Cover | March 5, 2009 | 6:50 PM EST

Treasury Secretary Timothy Geithner arrives on Capitol Hill on Tuesday, March 3, 2009, to testify before the House Ways and Means Committee. (AP Photo/Susan Walsh)

Washington ( – Three conservative congressmern -- Reps. Paul Ryan (R-Wis.), Cynthia Lummis (R-Wyo.) and Mario Diaz-Balart (R-Fla.) -- pounded on Treasury Secretary Timothy Geithner Thursday over the Obama administration’s plans to impose new tax increases and a national cap-and-trade program as the economy emerges from the current recession.
Geithner,who appeared before the House Budget Committee, said Obama's tax increases would only hit top wage earners and that the cap-and-trade program would be offset by Obama’s “Making Work Pay” tax credits.
Geithner said the administration would not call for tax increases or push for cap-and-trade until after the economy had begun to recover.
“By 2011, when the economy is projected to have recovered, it will be important for the nation to put in place policies that restore fiscal responsibility,” the Treasury secretary told the committee. “For that reason our budget includes changes that become effective at that time.”
But Ryan, the ranking Republican on the committee, told Geithner that he strongly disagreed, stopping just short of calling the Treasury secretary a liar when he labeled taxes that were not being raised as "a tax cut."  Ryan call the Obama administration’s budget “intellectually dishonest.”
“Let me shed some light on the statistical distortions occurring here,” the Wisconsin congressman said. “What it’s basically saying here is ‘by not raising taxes, we’re cutting taxes.’ No, you’re just not raising taxes.”
“To suggest (that) a failure to increase taxes is the same as a tax cut is just intellectually dishonest. Therefore, you can’t claim these things are net tax cuts, they’re net tax increases.”
Geithner, however ,defended the administration, saying that the tax increases would hit only a small minority of Americans and an even smaller minority of small business owners.
“The proposed income tax increases would apply to only 2 or 3 percent of small business owners and to a very small percentage of the highest income earning Americans,” he said.
Ryan, however, went on to assault the administration’s tax proposals as penalties on investment, and job creation.
“You’re saying to investors and small businesses, ‘Boy, if you’re going to hunker down and try and invest and try and create new jobs and bring new people back on the payroll, you’re going to see higher taxes in a year-and-a-half’s time.’ This is not good economics.”
Ryan also attacked the administration’s cap-and-trade proposal, which would place limits on how much carbon dioxide a company could produce – “caps” – and allow companies that produce less than their cap to sell the excess capacity to companies who can’t meet their caps – “trade.”
Ryan called the cap-and-trade plan a “tax by any other name,” because energy companies will be forced to pass on the cost of the allowances to consumers, effectively raising prices for everything from gas to heating oil to food.
“Turning on the electricity, putting gasoline in your gas tank, heating your home, and having a government program that makes that more expensive, you may not want to call it a tax, but it’s a tax,” Ryan argued. “If it acts like a duck and it quacks like a duck.”
“To suggest that you’re only taxing wealthy people when in fact you’re taxing anybody who consumes energy, is just not true,” Ryan added.
Diaz-Balart, a Florida Republican, asked Geithner why the administration would implement a policy that was “guaranteed” to raise prices.
“These (energy) industries are regulated industries; they pass on the cost of an increase in the price of energy to the consumers,” Balart said. “Yet you have anywhere between $600 and $800 billion in this cap-and-trade program, a tax on energy prices. Who’s going to pay that?”
Geithner explained that the program was necessary, and urged the congressmen to see it as a way to make people change their behavior.
“You can’t change behavior on how people use energy unless you affect the incentives for how they use it,” he replied.
The harshest criticism came from Lummis (R-Wyo.), who said the administration’s energy proposals would destroy productive capacity and punish American energy producers.
“Cap-and trade is the biggest damage you could do to the productive capacity of this economy,” she said. “What you’re going to do is send oil and gas production overseas.
“To take something like natural gas, which is the cleanest burning hydrocarbon, and punish it, and punish the people who produce it, is the most counter-productive thing that you could do.”