US economic recovery in jeopardy
WASHINGTON, D.C.: Steep automatic spending cuts slated for March 1 could stall the US economic recovery, Jack Lew, the nominee for US Treasury secretary, told Congress on Wednesday ( Thursday in Manila).
Lew, who faced a grilling in a Senate Finance Committee confirmation hearing, warned that the $85-billion sequester—toxic programmed cuts that will occur if Congress cannot find a compromise — would hit economic growth.
“Even as we move forward with deficit reduction, we need to make sure we leave sufficient room for critical investments in education, research, and infrastructure that we need for our economy to grow and compete globally,” Lew told the Senate panel in prepared remarks.
“We also have to avoid doing anything to degrade our national security or derail the economic recovery through abrupt moves in the short term,” he said.
“That is why we cannot allow the series of harmful automatic spending cuts known as the sequester to go into effect on March 1. These cuts would impose self- inflicted wounds to the recovery and put far too many jobs and businesses at risk,” Lew added.
Lew, nominated by President Barack Obama in January to succeed Timothy Geithner as Treasury chief, stressed the need for bipartisanship in a Washington which he said showed the worst divisions in his decades of public service.
“Forging bipartisan consensus is not an abstract idea for me. It is the fundamental thread that spans my professional life,” Obama’s former chief of staff and budget director said.
Obama, in his State of the Union address to a bitterly divided Congress late on Tuesday, called for more spending on infrastructure, education and skills training, and has promoted an overhaul of the federal tax code to promote economic growth and more jobs.
Republicans blasted Obama for proposing spending without sufficient tax cuts to spur growth and reduce the country’s yawning debt.
High corporate taxes
Ohio Senator Rob Portman, a Republican, pressed Lew about the high US corporate tax rate, saying the US average rate of 39.2 percent was 14 percentage points above the average of the Organization for Economic Cooperation and Development.
Portman noted that other countries were lowering their corporate tax rates and that 70 percent of that tax burden falls on US workers. Lew agreed there was a need to boost US competitiveness and a lower rate “would be good for American workers.”
Lew, 57, whose nomination was expected to clear the Democraticcontrolled Senate, was peppered with questions about his stint in the private sector at Citigroup during the financial crisis.
As treasury secretary he would have vast responsibilities, ranging from the budget, debt management and tax collection to defense of the dollar, economic sanctions and implementation of financial regulations.
Asked whether he knew, while he was a Citigroup executive, about the bank’s involvement in complex financial products that led to the 2007 to 2008 US financial crisis, Lew said that he was not in charge of the investment decisions.
Lew said that he had reported consistently about his controversial investment in a Cayman Islands fund, on which he took a loss when he sold it in 2010 as he moved to head the Office of Management and Budget in the Obama administration. At the time of the investment, he said, he did not know the address of the fund.
Lew also defended $940,000 he received in January 2009 for his work in 2008 at Citigroup, which received a $ 45 billion taxpayerfunded bailout to stay afloat, saying that it was in line with what others were getting for similar work.