I’m here at the House Budget Committee hearing, where White House budget director Jacob Lew is testifying about the Obama budget.
Rep. Paul Ryan, the chairman of the committee, pressed Lew on the administration’s projections.
The administration has claimed that the budget will drive deficts from 10 percent of GDP to roughly 3 percent of GDP. But Ryan noted that that estimate is based on the assumption of a much more robust economic recovery than outside analysts predict. For instance, the administration projects growth of over 4 percent in 2013, which is 1.3 percent higher than what the CBO has estimated. Also, 2013 happens to be the year in which the Bush tax rates on higher incomes, estates and capital gains expire. Lew said this will bring in $953 billion in new revenue. How can they be so confident, Ryan asked, that the economy will take off just when the administration is anticipating a massive tax hike?
Lew argued that the economy boomed back in the 1990s, when these higher tax rates prevailed.
Ryan responded that a lot of the high income earners were actually small businesses that would be hurt by the tax hikes.
“If your math doesn’t add up, then we’re all in a world of hurt,” Ryan said.