Paulson: Economy OK Despite Oil Prices

"The employment situation is very strong in this country, there's no doubt about it. We're creating new jobs -- 49 straight months," Paulson said on New York Mayor Michael Bloomberg's weekly radio program on WABC. Earlier Friday, crude oil topped $92 a barrel for the first time ever.

"Would I like to see oil at a lower price? Yes. But we are using energy more efficiently than we were a number of years ago, and this economy has held up very well against that challenge," Paulson said.

He noted that conditions in capital markets continue to improve after being roiled over the summer by a crisis in the subprime mortgage sector, although a recovery would "take some time."

"I happen to believe we're making real progress in the capital markets and that virtually every one of our credit markets are doing better today than they were a number of weeks ago," Paulson said.

He repeated his criticism of a tax overhaul being proposed by the House's top tax writer, Rep. Charles Rangel, D-N.Y., which would raise taxes for the wealthy and some corporations to pay for a repeal of the alternative minimum tax and lower taxes for the poor and many middle-income taxpayers.

"Again, I don't believe the right answer here is to increase other taxes to pay for that relief, and I think if you start raising (taxes on) the top two brackets or having a surcharge, you're going to hit a lot of small businesses," Paulson said.

Bloomberg agreed, saying "it will certainly hurt New York."