President Barack Obamas goal of reducing the nations expected $1.75 trillion budget deficit by at least half in four years is critical to the nations future, Treasury Secretary Timothy Geithner said today in prepared remarks to the House Ways and Means Committee.
Mr. Geithner said Treasurys projected deficit for this year, which includes expenditures for Mr. Obamas $787 billion fiscal stimulus package, also includes the $1.3 trillion deficit inherited from the Bush administration.
Failure to reduce deficits to this level (by fiscal 2013) would result in higher interest rates as government borrowing crowds out private investment, leading to slower growth and lower living standards for Americans, Mr. Geithner said.
Mr. Geithner also said a budget proposal by Mr. Obama that would tax the carried interest of investment partnerships such as hedge funds and private equity firms as ordinary income is intended to restore fairness to the tax code. Carried interest is currently subject only to capital gains tax, not the higher levies assessed for ordinary income.
By closing this carried interest provision, the tax code will provide equal tax treatment for wages regardless of whether an individual works as a teacher or a hedge fund manager, Mr. Geithner said in the text of his testimony.