Paulson Slams Senate Budget Proposals

by Mike Godfrey, Tax-News.com, Washington

19 March 2007

US Treasury Secretary Henry Paulson has criticised the 2008 Budget Resolution passed by the Senate Budget Committee last week, warning that the measures contained in the plan would undo the economic gains brought about by the tax cuts legislated during the Bush administration, while failing to adequately address the nation's long-term fiscal challenges.

"The budget resolution reported by the Senate Budget Committee assumes a significant tax increase, which is the last thing our economy needs as we work to extend the current expansion," Paulson stated.

He continued: "I am also disappointed that the resolution doesn't address entitlement reform. The rising costs of Social Security and Medicare, if left unchecked, will ultimately consume the bulk of the federal budget.

"Balancing the budget is only one step toward addressing entitlements, which is the long-term fiscal challenge. We must also keep the economy growing, both to create jobs and increase wages for American workers and to put us in a stronger fiscal position to deal with the growing entitlement challenges in the coming years."

Senate Budget Committee Chairman Kent Conrad claimed that the proposals are fiscally responsible, and fund critical national priorities without raising taxes. As well as providing a further two years of relief from the Alternative Minimum Tax, Conrad said that the Budget allows for new tax relief, the extension of expiring tax provisions, and sets the stage for tax simplification and reform.

However, Republicans have dubbed the proposals a "tax and spend" budget, and are warning that the measures would in fact leave the door open for significant tax increases and more debt. "It would be the largest tax increase ever," commented Sen. Chuck Grassley, ranking member of the Senate Finance Committee. "This budget puts a burden on the Finance Committee to come up with $916 billion."

Judd Gregg (R - NH), ranking member of the Senate Budget Committee, observed that the budget contains "significant new spending, significant new taxes, significant new debt," and must undergo "some much-needed adjustments".

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