Hatch says higher taxes for top earners will make U.S. a 2nd rate nation

The top Republican on the Senate panel in charge of tax policy said the United States will become a second rate nation if top earners have to pay higher taxes.

"The fact of the matter is that you raise those taxes, and see what you're going to get. You let them go up, like the Democrats (want to) let them go up, and we'll more quickly become a second rate nation," Senator Orrin Hatch said Tuesday in an interview with CBS News.

President Obama and Republicans in Congress struck a deal last December to extend for two more years the tax cuts that had been set to expire at the end of last year. The compromise allowed for an extension of tax cuts for all income levels that were a signature of President George W. Bush's administration.

"The Bush tax cuts were proven to be effective in their own way," Hatch, the top Republican on the Senate Finance Committee, told CBS' Nancy Cordes.

Obama had wanted the tax cuts on the wealthiest earners to expire, effectively raising the rate on the top 2 percent of households to 39.6 percent from 33 percent. Republicans insisted on the lower rates for all earners.

The compromise included an agreement to extend unemployment benefits for 13 months, which Democrats had insisted on over the objection of Republicans.

The conservative Utah senator was sharply critical of the way Obama has been handling the economy and the federal budget, arguing the president had failed to move aggressively to cut government spending.

"They really believe that we can spend our way out of a recession," Hatch said of the president and Democrats in Congress.

President Obama said earlier Tuesday he is confident the U.S. would avoid a double-dip recession, urging Americans to be patient as the economy continued to recover from its low point in 2008.

The Labor Department last week said the economy added just 54,000 jobs in May, the smallest increase in eight months, and the unemployment rate rose to 9.1 percent in May from April's 9.0 percent.

Hatch also expressed support for Rep. Paul Ryan's proposal to transform the fee-for-service Medicare into a voucher system that patients would use to buy subsidized health insurance from private insurers.

"I think he's come up with something that would save Medicare where the president's approach is going to destroy ... Medicare, because they're not doing anything to solve these problems," Hatch said.

His budget proposal has been sharply criticized by Democrats.