Capping Carbon Emissions May Increase Energy Rates, Orszag Says

March 1, 2009 — -- Office of Management and Budget Director Peter Orszag admitted this morning that capping carbon emissions may increase energy prices but said Americans would receive other benefits through President Obama's budget.

"Let's be fair about this," Orszag said in an exclusive "This Week" interview with George Stephanopoulos.

"Either you're going to look at what is collected through the tax code and what's returned through the tax code. And on that basis, there's a tax cut for 95 percent of Americans, or you have to go all in. Let's also count the benefits that families get through Pell Grants, the benefits that they'll receive through constraining health care costs, the benefits that they get from weatherizing their homes, and so on. All in, this budget makes the vast majority of American families much better off."

Republicans have criticized the administration for not being honest about the revenues in the president's $3.6 trillion budget proposal. In particular, many Republicans claim the proposal to create roughly $600 billion from capping carbon emissions will increase energy rates and amount to a tax on everyone.

Gingrich Blasts Obama's Cap-and-Trade Plan

Former GOP House Speaker Newt Gingrich targeted the energy proposal earlier this week.

"How dumb do they think we are, that they can pretend that an energy tax isn't an energy tax, and they can pretend that every retired American who uses electricity isn't going to pay it, and every person in New Hampshire who uses heating oil isn't going to pay it, and every person who drives a car isn't going to pay it?" Gingrich said at the Conservative Political Action Conference in Washington on Friday.

While Orszag stressed that healthcare reform is "key to our fiscal future," he made clear the administration will not increase the deficit further to pay for health care reforms. If enough revenues don't come in, Orszag said, the administration will not scale back its health care promises.

If that's the case, "we need some other proposal," Orszag said. "We're going forward with health care. We're going to get health care reform done this year. I think this proposal will get enacted. But if it doesn't, then we're going to need to come up with some other offset."

Orszag: Obama Open to Health Commission

But asked which would take priority, health care or energy, if they are not able to fulfill both proposals this year, Orszag said simply they hope to do both.

"I think we can. We face big problems, and... we've got to tackle them. Clearly, this budget is changing course... and the GPS system is recalculating the route and people are getting used to that. But we have these big problems, and we need to tackle them."

Orszag also expressed openness to the idea of establishing some kind of commission on health care. "I think it's clear that we need some changes in the process," he said. "Let's focus on that, because that is the key driver of those long-term deficits. That's why we want to get reform done this year. We can make our health care system much more efficient, and that is the single most important thing we could do to get those long-term deficits under control."

The OMB director also said the nation will save much-needed government funds by ending the Iraq war. "Let's be clear about this. We're going to spend about $140 billion on the war this year. The president is committed to getting -- to winding down the war. That's going to save money. It's pretty clear," he said.

"The deficit reduction doesn't just come from the economy recovering. And by 2013 or 2014, let's all hope that the economy is back on its feet. That's what we're trying to do through all -- all the changes that we're making. But we have $2 trillion in deficit reduction contained in the budget. We've got both spending constraints and additional revenue, as the economy recovers. That's where a lot of the deficit reduction comes from," Orszag said in defense of his number crunching.

In a separate exclusive interview, Republican Whip, Rep. Eric Cantor, R-Va., spoke out against the president's budget. "This budget obviously has raised a lot of concerns and a lot of different areas. But let's remember what the priority should be right now. The priority should be focused on preserving and protecting creating new jobs....So we need to focus our efforts to make sure that what we do in Washington does one thing and one thing first, and that is to focus on economic growth," Cantor said. "We will have to work on this budget a lot in order to get this spending plan into that type of focus."

But Cantor declined to say whether he expects any Republicans to vote for the budget.

"You know, this budget has to make its way through the House. And, again, we want to work with this president. We want people to regain their confidence in Washington. And what people are looking for is results. And what we see in this budget, frankly, is an attempt, again, to try and stimulate the economy through government expenditure. And, you know, at best what that can do is redistribute wealth. It can't create jobs; it can't create wealth. We've got to get back to focusing on job creation and creating prosperity."

Cantor also rejected Rush Limbaugh's hopes that the president's economic proposals fail, saying he "absolutely" disagreed with the talk radio host.

Addressing CPAC on Saturday, Limbaugh asked, "What is so strange about being honest and saying I want Barack Obama to fail if his mission is to restructure and reform this country so that capitalism and individual liberty are not its foundations?"

"I don't think anyone wants anything to fail right now," Cantor said. "We have such challenges, what we need to do is we need to put forth solutions to the problems that real families are facing today. And our commonsense, conservative principles of limited government, and the belief in free markets, and the belief that really opportunity can only be created by the private sector are going to undergird our proposals going forward."

Asked if the Republican Party needs to move more towards the middle on some issues, such as gay rights, in order to broaden its base, Cantor agreed the GOP should be more inclusive.

"There is no question the Republican Party has to return to be one of inclusion, not exclusion. And we are a party with many ideas. And we have in that a commitment to make sure that we have positive alternatives, if we don't agree with this administration or the House Democrats, and to continue to put those ideas forward," he said. "Let's come up with solutions that actually produce results for a change, instead of making matters worse, which Washington is famous for."

Finally, the Senate this week is going to be debating an omnibus spending proposal that has several thousand earmarks. Orszag said the president will sign the 2009 spending bill, despite his campaign pledge to reduce earmarks. On the campaign trail, Obama pledged to reduce earmarks to below 1994 levels — when the GOP took control of the House — or less than $7.8 billion a year.

"This is last year's business. We want to just move on," Orszag said. "Let's get this bill done, get it into law and move forward."

But he went on to say Obama intends to work on earmark reform in the future. "We're going to be working with the Congress," he said. "We want to make sure that earmarks are reduced and they're also transparent. We're going to work with the Congress on a set of reforms to achieve those."