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WASHINGTON – President Barack Obama’s proposed tax increases are being met with misgivings by both Republicans and Democrats in Congress as he sends his Treasury secretary to Capitol Hill to defend them.

Lawmakers in both parties question Obama’s call to reduce high-income earners’ tax deductions for the interest on their house payments and for charitable contributions. Also drawing fire is his proposal to start taxing industries on their greenhouse gas pollution — a move sure to raise consumers’ electric rates.  Obama and his top aides have been promoting the budget package since unveiling an outline last week, but Tuesday will provide the lawmakers their first opportunity to publicly question top officials about the details.

Administration officials say the nation’s economic crisis requires bold action to right the economy and expand access to health care while providing tax breaks to middle- and low-income families.

The economy took another hit Monday when the Dow Jones Industrial Average plunged below 7,000 for the first time since 1997.

Treasury Secretary Tim Geithner was scheduled to appear Tuesday before the tax-writing House Ways and Means Committee, which also is likely to question him about Obama’s declaration last week that he may be asking Congress this year for another $750 billion bailout for troubled banks.

Meanwhile, White House Budget Director Peter Orszag was to testify Tuesday before the House Budget Committee on Obama’s spending priorities in the administration’s $3.5 trillion budget blueprint for the 2010 fiscal year beginning Oct. 1.

Taxes only on wealthiest?
Obama has been careful throughout the presidential campaign and since being elected to say he would impose higher taxes only on the wealthiest. Republicans, however, say Obama’s energy proposal amounts to a tax that would increase energy costs for all Americans.

“This massive hidden energy tax is going to work its way through every aspect of American life,” said Rep. Dave Camp of Michigan, the top Republican on the Ways and Means Committee. “How we light our homes, heat our homes and pay for the gas in our cars, in every phase of our daily lives, we will be paying higher costs.”

Under the energy plan, Obama wants to reduce the emissions blamed for global warming by auctioning off carbon pollution permits. The proposal, known as cap and trade, is projected to raise $646 billion over 10 years.

Most of the money would be used to pay for Obama’s “Making Work Pay” tax credit, which provides up to $400 a year to individuals and $800 a year to couples. The plan also would raise money for clean-fuel technologies, such as solar and wind power.

Orszag has acknowledged that the energy proposal would increase costs for consumers, but he argues that the vast majority of consumers will get tax breaks elsewhere in Obama’s budget package.

CHARLOTTE, N.C. – Struggling insurer American International Group Inc. will receive up to $30 billion in additional federal assistance in the fourth government rescue of the company, a person familiar with the matter told The Associated Press on Sunday.

The new infusion is intended to prop up AIG — once the world’s largest insurer — as it is expected to announce $60 billion in quarterly losses early Monday, the source said on the condition of anonymity because the discussions are still ongoing.

The company, which is considered too large to fail, previously received about $150 billion in loans from the government, which now has an 80 percent stake in the company.

Under the new deal, the U.S. Treasury and the Federal Reserve would provide about $30 billion in fresh capital to AIG from the government’s Troubled Assets Relief Program, or TARP. The money would be provided as a standby line of equity that AIG could tap as its losses mount, the source said.

AIG has already received $40 billion from TARP.

In exchange for the latest infusion, the Federal Reserve would take stakes in two international units, the source said.

Instead of paying back $38 billion in cash with interest that it has used from a Federal Reserve credit line, AIG now will repay that amount with equity stakes Asia-based American International Assurance Co. and American Life Insurance Co., which operates in 50 countries.

Under the plan, another $20 billion from a Federal Reserve credit line remains available for borrowing, the source said.

In order to strengthen the company, AIG also plans to combine its U.S. and foreign property-casualty insurance operations into a new unit, with a new name and separate management, the source said. About 20 percent of the property-casualty business would be taken public.

To further reduce its debt, AIG will turn $5 billion to $10 billion worth of debt into new securities backed by life insurance assets.

AIG spokesman Nick Ashooh declined to comment on the rescue package. The Federal Reserve Bank of New York, which is handling the government loan, did not return requests for comment Sunday evening. Treasury Department spokesman Isaac Baker also declined to comment.

The company’s board met Sunday to vote on the revised bailout plan.

Major credit rating agencies have already signed off on the deal, according to media reports. Without the support of the credit rating agencies, AIG would have faced crippling cuts to its ratings.

AIG has been forced to seek more help in part because the ongoing recession and its falling stock price, now well under $1.

Among its biggest problems: It can’t sell assets to pay back government loans because the credit crisis is preventing would-be buyers from getting financing to complete such deals.

As of Feb. 13, AIG had sold interests in nine businesses.

In November, the U.S. government restructured previous loans provided to AIG, giving the company about $150 billion in total as part of a rescue package to help the insurer remain in business amid the worsening credit crisis. That package replaced earlier loans, including the original $85 billion lent in September, after it became apparent the insurer needed more funds.

Problems at AIG did not come from its traditional insurance operations, but instead from its financial services units, and primarily its business insuring mortgage-backed securities and other risky debt against default.

Shares of AIG closed at 42 cents on Friday. The stock, which traded at $49.50 a year ago, has lost nearly all of its value since the market meltdown began in September.

House Speaker Nancy Pelosi, shown with Rep. Henry Waxman, said lawmakers have their work cut out for them.

WASHINGTON — President Barack Obama has made it clear he intends to reorder the nation’s priorities, but Congress must act to make that a reality.

It won’t be easy.

Mr. Obama is asking the 111th Congress for accomplishments that rival those of the 1933 Congress that passed the New Deal and the 1965 Congress that enacted the Great Society. But despite the pain of the current crisis, it doesn’t yet compare with the devastation of the Great Depression or the upheaval of the 1960s. And Congress’s pace in recent years has been anything but speedy.

In his prime-time speech and budget plan this week, Mr. Obama urged Congress to take on sweeping proposals he promoted during the campaign to address climate change and overhaul health care. In addition, the downturn is forcing lawmakers to simultaneously debate fixes for the mortgage crisis and the auto industry, along with ways to rewrite rules for the financial sector.

Democrats on Capitol Hill are also pushing items on their longtime agenda, such as giving the District of Columbia a vote in Congress, expanding funding for stem-cell research and requiring broader use of renewable energy. They hope to pass a 2010 budget by early April and will need to enact a dozen individual spending bills for next year.

Mr. Obama and the Democrats may have relatively little time to get all this done. The president has considerable political momentum now, but that might not last. By the middle of next year, the approaching November elections will make it much harder to strike legislative deals.

After outlining the agenda this week, House Speaker Nancy Pelosi told reporters, “Our work is well cut out for us.”

While the Republicans are in the minority, they still can create significant problems for the Democrats — especially in the Senate, where the majority often needs 60 votes to overcome parliamentary obstacles.

That task is harder because Al Franken of Minnesota, who could give the Democrats their 59th vote in the Senate, is embroiled in an election dispute with former Republican Sen. Norm Coleman. And Sen. Edward Kennedy (D., Mass.) suffers from brain cancer, making his schedule uncertain.

“This is going to require compromise and negotiation with Senate Republicans,” said Jim Manley, spokesman for Senate Majority Leader Harry Reid (D., Nev.). “The sooner everyone realizes that, the better off we’ll be.”

Senate Minority Leader Mitch McConnell and other Republicans can create obstacles for President Obama's agenda.

At a meeting Friday of the Conservative Political Action Committee, Senate Minority Leader Mitch McConnell (R., Ky.) and House Minority Leader John Boehner (R., Ohio) left little doubt about their readiness to fight the Democrats.

“The stimulus, the omnibus, the budget — it’s all one big down payment on a new American socialist experiment,” Mr. Boehner told cheering conservatives.

But managing the tensions within Democratic ranks also will be a challenge. On Thursday, moderate “Blue Dog” Democrats forced House leaders to delay a vote on a bill that would empower judges to rewrite the mortgages of people declaring bankruptcy. Critics say this would add dangerous uncertainty to the home-loan market, raising interest rates and making it even harder to get mortgages.

Beyond that, Congress, like any complex institution, can only accomplish so much at any given time. Bills must be considered by subcommittees and full committees, and lengthy negotiations often occur before legislation can be passed.

House and Senate Democrats have concluded that climate-change legislation and a health-care overhaul will probably be the toughest items to push through.

Rep. Henry Waxman (D., Calif.), chairman of the House Energy and Commerce Committee, has vowed to have a climate-change bill, including a cap-and-trade system for controlling harmful emissions, ready for floor action by Memorial Day. That would set the stage for votes in the full House this summer.

That means the battle over health care will probably be put off until later in the year, if only because many of the lawmakers involved in climate-change issues also specialize in health care.

Whatever happens, the road ahead carries risks for Democrats. Failure to deliver on the Obama agenda threatens to alienate voters. But delivering on those goals comes with risks, too, potentially forcing the majority party to explain why it raised taxes or eliminated cherished programs. And Republicans will have to balance their desire to block many of Democratic initiatives with the need to be something more than naysayers.

Despite the obstacles, the new Congress has already enacted several major laws this year, including a $787 billion economic-stimulus package and legislation on children’s health care and pay equity.

Those challenges pale next to what lies ahead. “We just did the easiest of the tough stuff,” Mr. Manley said. “It only gets harder from here on out.”