Lew Says Infrastructure Spending Still Needed to Aid Economy

White House Chief of Staff Jack Lew said hundreds of billions of dollars in spending for roads and bridges, education and manufacturing are necessary to keep the U.S. economy growing.

“Most Americans understand that a crumbling infrastructure is not the way to build an economy that can last,” Lew, the former White House budget director, said on CNN’s “State of the Union” program. “We need to make sure we have a manufacturing base in this country” and workers with appropriate skills.

Election-year sparring over the budget begins today as President Barack Obama submits the fourth spending blueprint of his presidency, a multitrillion-dollar package that calls for $350 billion in short-term spending to create jobs and a $476 billion, six-year highway bill, while saying it will cut $4 trillion from the deficit over a decade, partly by raising taxes on the wealthy.

The fiscal 2013 budget, for the year beginning Oct. 1 projects a $901 billion deficit. That’s down from a $1.33 trillion deficit projected for fiscal 2012, the fourth consecutive year of $1 trillion-plus deficits.

The budget proposal borrows heavily from a package of tax increases and spending cuts that Obama put forward in September, which Republicans in Congress have either ignored or rejected as unworkable or unnecessary.

Re-Election Campaign

Obama faces a re-election campaign, and the budget amounts to a campaign platform reflecting his vision for the country, while Republican rivals question its direction and cost.

Senate Republican Leader Mitch McConnell said “no,” when asked on CBS’s “Face the Nation” if Obama’s budget had any chance of passage in that chamber.

Today’s budget proposal is loaded with “massive taxes” on small business and families, requires “bureaucratic rationing” of Medicare and Medicaid (USBOMDCA), and “hollows out” spending for defense and national security, Republican Representative Paul Ryan, chairman of the House Budget Committee, said on ABC‘s “This Week.”

Ryan said he is planning an alternative budget that would drive down deficits through an overhaul of Medicare (USBOMDCR) without calling for any tax increases that may slow the economy.

Raising Taxes

“It’s clearly not the case that this is a budget that’s based on just raising taxes,” Lew said on ABC. “We have tax cuts that go to the wealthiest people in America who are going to have to pay their fair share.”

Obama is pressing for a new 30 percent minimum tax on people earning more than $1 million annually, described as the “Buffett Rule” after billionaire investor Warren Buffett, who has said he shouldn’t pay taxes at a lower rate than his employees.

Obama wants the Bush-era tax cuts to expire for families taking home more than $250,000 a year, and would cap the value of itemized deductions for top earners at 28 percent, according to administration officials who briefed reporters Feb. 10 on budget highlights.

Big financial institutions would face $61 billion over 10 years in a “Financial Crisis Responsibility Fee” to help pay for the bank bailout program and a home-mortgage refinance initiative.

A dozen tax breaks for oil, natural gas and coal companies would be abolished, for increased taxes of $41 billion over a decade.

Career Centers

Obama plans to announce later today an $8 billion Community College to Career Fund, a budget initiative that would link businesses and community colleges to train as many as 2 million workers for jobs in high-growth, high demand industries, according to a statement issued by the White House.

Those areas include health care, advanced manufacturing, transportation, clean energy and information technology, the statement said. The goal is treat community colleges as “career centers,” and train students for jobs that local businesses need to fill now.

The president will make the announcement at an event at Northern Virginia Community College in Annandale, Virginia, outside Washington. The initiative, part of his Jan. 24 State of the Union message, would be administered by the Departments of Education and Labor.

Spending Cuts

Spending cuts over a decade include $278 billion in farm subsidies, federal workers’ retirement plans and the Pension Benefit Guarantee Corp., which insures company pensions. Defense spending (USBODEFN) would decline 5 percent from last year, and there would be more than $360 billion in savings over a decade in Medicare (USBOMDCR), Medicaid and other health programs, according to a Feb. 10 administration fact sheet.

“There are a lot of tough cuts” in the budget, Lew said on CNN. There’s $2.50 in cuts for each $1 in tax increases, he said.

“We have to focus on the long term and the short term at the same time,” the White House chief of staff said on ABC’s “This Week” program. “Short term, we need to keep the economy growing, and in the long term, we need to get the deficit under control.”

Lew used his appearance on NBC’s “Meet the Press” and other Sunday talk shows to press Congress to extend the payroll tax cut to the end of the year as a stimulus to the economy. Taxes will increase for 160 million Americans if lawmakers don’t act by the time it expires on Feb. 29.

Sustaining Growth

“We still need to pay attention to sustaining economic growth and creating jobs,” Lew said on CNN. He declined to predict what the economy would look like in September as the elections draw near but said job growth has been increasing, with employers adding 243,000 jobs in January.

“I can’t predict that each month will be as good as the last few but we’re certainly headed in the right direction,” he said. “The payroll tax needs to be extended, on time and without a lot of drama” so it doesn’t create uncertainty in the economy.

The U.S. can’t afford to “have the kind of dysfunction that last year became part of the uncertainty that held back the economy,” Lew said on “Fox News Sunday.”

To contact the reporter on this story: Roger Runningen in Washington at rrunningen@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net

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