GOP Attacks Climate Plan as Too Costly

By JOHN D. MCKINNON
Reuters

Treasury Secretary Timothy Geithner testifies before the House Ways and Means Committee on Tuesday.

WASHINGTON -- Republicans opened a new front in their attack on the Obama administration's budget, charging that its ambitious climate-change plan would impose hefty costs on consumers and businesses.
Despite the Obama administration's claim that its budget wouldn't raise taxes on families earning less than $250,000 a year, "the budget before us assumes large amounts of money" from the climate-change legislation, Rep. Dave Camp of Michigan, the top Republican on the tax-writing House Ways and Means Committee, said at a hearing Tuesday. "And that means higher prices for Americans for food, for gas, for electricity, and in a state like Michigan for home heating -- pretty much anything that they buy."
Other Republicans focused on the cost to businesses. The plan aims to reduce greenhouse gases by imposing limits on emissions, and it would require businesses to pay fees if they exceed their caps.
Administration officials countered that their climate-change revenue wouldn't affect consumers until about 2012, well after the recession is expected to have lifted. They also pointed out that it would be designed to provide offsetting tax breaks for lower-income people, who tend to pay a higher percentage of their income in energy costs.
Still, administration officials said, addressing climate change -- along with the companion goal of making the U.S. more energy-independent -- requires making less-polluting alternative fuels become more attractive. That means imposing new costs on traditional energy sources.
See the steps by which the federal budget will be finalized in the coming months.
"There is no way to try to get us on a path to energy independence and address the critical problems caused by climate change without changing the incentives," Treasury Secretary Timothy Geithner said at the Ways and Means Committee hearing.
The administration said in its budget blueprint last week that climate-change legislation would raise nearly $646 billion for the government over the next decade. The budget suggested that the plan might raise more than that, however. It added that "all additional net proceeds will be used to further compensate the public."
Some Republicans believe the actual amount raised by climate-change legislation could be two to three times that amount. They cite research by the nonpartisan Congressional Budget Office, among other sources.

A person familiar with the administration's thinking emphasized that the discussions on designing climate-change legislation are just beginning and that the amount of money the plan raises will be determined in discussions with lawmakers of both parties. But, the person added, the $646 billion estimate was probably "conservative."
The administration also is opening the door to another revenue source to help cover the cost of its health-care plan -- a cap on the tax break that the government gives to employees for their employer-provided health care. In its budget documents, the White House said it was open to serious ideas for covering the cost of health-care overhaul, including a cap on the current break, perhaps for higher earners.
The discussions over climate-change revenue and health-care taxes are at the center of the pivotal debate on Capitol Hill: how and whether to raise revenue that will be necessary if the government is going to address big long-term challenges and reduce the budget deficit at the same time.

Obama administration officials were at pains Tuesday to show that their revamp of health care, energy and education are crucial to making the recovery sustainable and reducing costs in entitlement programs such as Medicare. Health-care overhaul "is the single most important thing we can do to get our long-term entitlements under control," White House Budget Director Peter Orszag said at a House Budget Committee hearing.
Write to John D. McKinnon at john.mckinnon@wsj.com