Grassley said Obama's budget proposal to raise taxes, starting in 2011, on individuals earning more than $200,000 and on households earning more than $250,000 will hurt small businesses.
"These small businesses happen to create 74 percent of all new private sector jobs in the United States," Grassley said. "Tell these business owners their taxes will go up. Odds are, they'll cut spending. They'll cancel orders for new equipment, cut health insurance for their employees, stop hiring, and lay people off."
He also said Obama's proposal for mandatory limits on carbon dioxide emissions to combat climate change will lead to higher energy costs and amount to an "average hidden tax increase of around $3,000 per household a year." The Obama administration maintains that revenue from auctioning off carbon emission allowances would offset much of the higher energy costs for many Americans.
In the past week, Obama's proposals for major health care, energy and education changes amid a recession faced skepticism from both Democrats and Republicans on Capitol Hill. North Dakota Sen. Kent Conrad, the Democratic chairman of the Budget Committee, called the track of future deficits "unsustainable."
Obama is projecting a federal deficit of $1.75 trillion this year, by far the largest in history, but says he can get it down to $533 billion by 2013.
On Saturday, Grassley criticized Obama's proposals for tax increases as failing "to connect all the dots." The senator said the major tax increases will only force people to drop out of the work force, reducing tax revenue to pay down the deficit.
"There's evidence that the president and his people understand this, even if their budget doesn't show it," Grassley said. "They say they don't want to raise taxes until 2011 because the economy is too weak. ... Well, if the president admits that tax increases hurt the economy, that will be true in two years as it is true today."