Timothy Geithner
Mary Altaffer  /  AP
U.S. Treasury Secretary Timothy Geithner speaks to members and guests of The Harvard Club of New York City on May 17.
updated 6/3/2011 9:26:22 AM ET 2011-06-03T13:26:22

Treasury Secretary Tim Geithner has met with House freshmen and says he is confident a debt crisis will be averted.

Geithner met privately in the Capitol on Thursday to discuss the partisan standoff over boosting the government's debt ceiling. The session lasted nearly an hour, and Geithner told reporters afterward that he is confident that a default crisis will be avoided and that the two sides will reach an accord on a long-term fiscal plan.

Freshman Republicans emerging from the meeting say they told Geithner they want President Barack Obama to present a specific plan for curbing the government's debt.

Story: Geithner: Republicans responsible if US defaults

The government has reached its $14.3 trillion borrowing limit. Geithner has said Congress must extend the cap by Aug. 2 or there could be a first-ever federal default.

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Video: One-on-one with Sec. Geithner

  1. Transcript of: One-on-one with Sec. Geithner

    MR. GREGORY: Good morning. Millions of Americans will rush to file their tax return by tomorrow's deadline at a time when taxes are at the heart of the budget debate here in Washington . The spending fight and high gas prices , with a national average now of $3.83 a gallon, top of mind for the president's chief economic adviser, Treasury Secretary Tim Geithner . I sat down with him yesterday at the Treasury Department . There's so much to get to. I want to begin with the next big fight here in Washington . The government nearly shut down because this year's budget . Now there's the decision to raise the credit limit on America 's credit card, with the debt at $14 trillion. That is, raising the debt ceiling. Will the president agree, as Republicans demand, to tie spending cuts to an agreement to raise the debt ceiling?

    SEC'Y TIMOTHY GEITHNER: David , let me tell you how we're going to do this. Congress is going to have to raise the debt limit. They understand that. That's absolutely essential to preserve the creditworthiness of the United States of America. You know, we're a country that meets its obligations, and we have to meet our obligations, and they recognize that. I heard -- in fact, I heard the leadership tell the president that again on Wednesday.

    MR. GREGORY: But you hear so many Republicans saying, "No, no, there's got to be a deal here."

    SEC'Y GEITHNER: But, but, but as we do that, in parallel to that, we're going to work with the Republicans and Democrats and try and get people to come together on a long-term plan to bring our fiscal position back down towards balance so we're living within our means again. We have to do both those two things. And we're going to work very hard again to take advantage of this opportunity to get Democrats and Republicans to come together.

    MR. GREGORY: But does there have to be a link?

    SEC'Y GEITHNER: I think you can do these things in parallel. And I'll -- let me say it this way. You know, we're going to move forward, and we want -- again, we want Congress to put in place a comprehensive framework, a balanced framework, that can reduce our long-term deficits. And we're going to work hard to do that. But if, by the time we need to raise the debt limit, we haven't worked all that out, Congress still has to raise the debt limit. Again, leadership recognize that. They don't -- they know...

    MR. GREGORY: Or, or else what? Because they say a lot of your warnings are overblown. Those like Senator DeMint of South Carolina say those warnings about, you know, the catastrophe are overblown.

    SEC'Y GEITHNER: Oh, that's absolutely not the case. And again, I think -- I've spent a lot of time with Republicans and Democrats on this -- you know, I saw the Senate Finance Committee last week -- and they absolutely understand the stakes in this. And the leadership understand that you can't play around with this, you can't take it too long. And those people up there who are telling people that you can take this to the brink because it gives them some leverage, they're going to own the responsibility for the risk that creates for the American economy .

    MR. GREGORY: And what are the stakes?

    SEC'Y GEITHNER: Well, again, if you just think of it this way, if you allow people to start to doubt whether the United States of America will meet its obligations, that would be catastrophic, and we can't take that risk. But again, the responsible people up there understand that, and I'm very confident they'll do this. And I heard them say that, that to the president on Wednesday. Again, they said that, "We, we recognize we can't play around with this."

    MR. GREGORY: Do you think this risks another shutdown?

    SEC'Y GEITHNER: I don't think so. Again, I think if you, if you listen carefully -- I know there's a lot of politics in the moment, but if you listen carefully to what people are saying, a very important thing has happened. You've seen the Republican leadership say we need to try and cut about $4 trillion from our deficit over about 10 years. You saw a bipartisan fiscal commission the president established lay out basically the same target. And the president of the United States on Wednesday laid out a balanced, responsible plan that achieves about the same level of deficit reduction over about the same period. We take a little longer because we want to go a little more gradually. But when you have leadership of Republicans and Democrats saying that, "This is the right thing to do for the economy now. We all agree on how much you have to do," that's very important. And what we like to -- Congress to do is, again, before we get too far into June we want Congress to agree on concrete targets, deadlines, timelines, and an enforcement mechanism that will force Congress to live within its means over the next three to five years.

    MR. GREGORY: OK, but one more on the debt limit. When he was Senator Obama , he voted against raising the debt limit in 2006 .

    SEC'Y GEITHNER: He did. And he said...

    MR. GREGORY: And he said, he said at the time that the debt problem was a, quote, "failure of leadership , and Americans deserve better." Look, the debt has gone up 35 percent during his presidency. Is that also a failure of leadership ?

    SEC'Y GEITHNER: You know, you, you heard him say this week that that was a mistake. He recognized that's a mistake, and he recognizes that's not something you can play politics with. You know, Steny Hoyer said in the -- on the floor something similar earlier this year. He said that, "I thought this was something you could demagogue. I was wrong at that point. Not something you can play politics with." Again, that it's -- this is a absolutely critical thing for people to understand . This is about the trust and confidence in the American people , and the world is watching us. Markets around the world are watching Washington to see whether this political leadership , Republicans and Democrats , understand that we need to get on with it and start to bring down the long-term deficits. And, of course, as we do that, as we work that out, Congress will pass the debt limit.

    MR. GREGORY: Let me ask you about gas prices . That's what Americans are thinking about around the country . And we've done a little sampling. If you look at some of the prices around the country , in Los Angeles like a lot of the West Coast it's over $4, $4.19. Chicago 's over $4. Cleveland is $3.85, New York City $3.77. Are you worried that gas is going to go up to what, $5?

    SEC'Y GEITHNER: You're right, gas prices have risen quite a lot. And people can feel it, and it's hurting. And it's, and it's -- you -- had some effect on consumer confidence . Makes people feel a little bit more uneasy about the economy as a whole.

    MR. GREGORY: Mm-hmm.

    SEC'Y GEITHNER: And what's driving this is, is partly just growth is stronger around the world as we come out of this crisis, and that's a good thing. But it's partly a reflection of concerns about what's happening in North Africa and the Mideast and the gulf, what that might mean for supply in the future. And, you know, part of it, David , is the impact of the nuclear disaster in Japan , because people are wondering whether nuclear power's going to be able to meet as large a share of our energy needs in the future. So those things are all what's driving gas prices higher.

    MR. GREGORY: Do they keep going higher as we get into the summer, do you think?

    SEC'Y GEITHNER: Well, you know, it's just -- again, it's hard to know. And, you know, at this level there's a measurable impact on the economy , but it's an impact we can, we can withstand, we can absorb because the economy itself is still gradually getting stronger, and we've now had about 18 months of positive growth.

    MR. GREGORY: It doesn't slow down recovery?

    SEC'Y GEITHNER: It slows it down modestly. It's a measurable -- you can feel it, you can see it, but it won't put in danger the recovery under way. But people are going to feel it still, and that's why it's very important, David , we work on fixing our long-term energy problems. Because you need Americans to use energy more efficiently, we need to make sure we're shifting to other forms of energy , reduce our dependence on foreign oil. Those things are very important.

    MR. GREGORY: Let me focus, as well, on jobs. Something we do frequently is put up the unemployment chart dating back to February of 2009 , when it was at 8.2 percent, the first full month of the Obama presidency. The high point, of course, October 2009 , over 10 percent; March 2011 it's at 8.8 percent. Mitt Romney , who looks like he's going to run to challenge the president next year, has taken aim at the record on jobs of this administration.

    GOV. ROMNEY: Across the nation, over 20 million Americans still can't find a job or have given up looking. How has this happened in the nation that leads the world in innovation and productivity? The answer is that President Obama 's policies have failed. He and virtually all the people around him have never worked in the real economy . They just don't know how jobs are created in the private sector .

    MR. GREGORY: He's not just taking aim at the president, he's taking aim at you too.

    SEC'Y GEITHNER: It's just about politics, and I understand that. People have to say those kind of things. But if you look at what's happened to this economy over the last two and a half years, this president came in and he did what was necessary to prevent the Great Depression , to put out a terribly damaging financial fire that was engulfing not just this economy , but the global economy as a whole. And for 18 months this economy has been growing, people have been creating jobs. We've had more than a million jobs created in the private sector just over this -- these -- this last year. And we had job creation come back stronger and faster than you saw in the last two recoveries. Now, we have a lot of challenges ahead. Unemployment's still close to 9 percent. A lot of people are hurting still. It's a very tough economy still because of the...

    MR. GREGORY: Is it still a jobs crisis?

    SEC'Y GEITHNER: Well, it's -- I would still, still -- we're still in a deeply difficult, deeply challenging economy for millions and millions of Americans , and that is because this crisis was so severe and the scars ran so deep. And it's just going to take more time to heal it. But our economy 's getting stronger. And don't bet against this economy . Again, if you look at productivity growth , you look at the strength of private investment by businesses, you look at what's happening to U.S. exports, you look at how strong high technology is, the agricultural economy in the United States is the strongest in, in decades. There is a lot of sign of not just healing, but strength and resilient and dynamism in this economy because of the policies this president of the United States put in place. Now -- but we have a lot of work to do , and we're going to have a debate about what the best strategy is for the country going forward.

    MR. GREGORY: And I...

    SEC'Y GEITHNER: But I want to come back to where you began, though, David , in this...

    MR. GREGORY: Yeah.

    SEC'Y GEITHNER: ...because it's very important people understand that we may disagree exactly on what the best strategy is for dealing with future entitlements, we may disagree on what we have to do on tax reform to fix our broken tax code , but we all have to understand it is absolutely essential that we put in place a set of targets and timelines and credible enforcement measures that will bring out fiscal position back down to balance. Because to do that we have to, we have to live within our means so that we can afford to make the investments and things necessary to make sure our economy grows in the future.

    MR. GREGORY: I want to get into some of the high points on the, on the budget , but before I leave jobs, by next fall -- yes, it's the election calendar -- do you think unemployment is still above 8 percent?

    SEC'Y GEITHNER: If you look at what private economists say about the economy , you know, there's a lot of uncertainty in forecasts, no magic in forecasts, there's much more confidence now that we're going to have pretty steady, solid growth over this period of time, and enough jobs created that you're going to see the unemployment rate fall to a 8 percent, some people say below 8 percent, by the end of 2012 . But, again, that's private economists and this is, you know, obviously, inherently uncertain.

    MR. GREGORY: I want to talk about the budget , but let's start with the tax fight. The president made it very clear, reacting to Chairman Paul Ryan 's budget proposal, which includes a lot of tax cuts , that he wasn't going to go there.

    PRES. BARACK OBAMA: We cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire in our society. We can't afford it. And I refuse to renew them again.

    MR. GREGORY: That's a veto threat.

    SEC'Y GEITHNER: Well, you know, the president's been very clear on this from the beginning, and he's got absolutely the right position for the economy as a whole, that the taxes the most fortunate Americans pay today are lower than they've been in a decade. And in order to sustain them -- if you were going to -- if you wanted to try to sustain those tax breaks , you have to do one of two things . You have to either cut incredibly deeply into commitments to our seniors , to the elderly, to the poor, to the disabled, or you have to gut spending on defense, or you have to gut spending on education. Or you have to ask me to go out and borrow trillions of dollars from China , from Americans , from our children to afford those. And we're not prepared to do that. And it is not necessary to do that and would not be responsible to do that. So when the president says we can't afford it, he's absolutely right.

    MR. GREGORY: But can you really pursue a policy where you cut the deficit if you exempt the middle class from any pain in terms of tax hikes?

    SEC'Y GEITHNER: No, absolutely. This has to be balanced. It's going to touch all Americans . The framework the president laid out on Wednesday of this week was a comprehensive balanced set of cuts on spending, things that'll...

    MR. GREGORY: Right, but I'm asking about taxes , because he says, "No, no way am I raising taxes on those making $250,000 or less."

    SEC'Y GEITHNER: Well, well, let me just say, the spending restraints, spending reforms the president talked about, they will touch all Americans . Now, on the tax side, if you look at the way our tax code is structured, and it's a broken tax code , we spend hundreds of billions of dollars a year on special tax expenditures , special tax breaks that go to the -- just the top -- the wealthiest Americans . So we have plenty of room in this tax code that there's just a modest increase in the burden on the most fortunate. And if we do that, then we can afford to, along with other spending cuts, we can preserve the commitments we made to our seniors , to the disabled, to the poor, and we can still make sure we're investing in education...

    MR. GREGORY: But, but the president, the president has said that Paul Ryan 's plan is not a serious plan. He's basically said, "No way, no how," on renewing the Bush era tax cuts . And you're talking about working in parallel tracks and getting something done. Hasn 't he completely poisoned the well here? Look what we just went through two weeks ago.

    SEC'Y GEITHNER: What we're going to do is what's good for the economy , and we all recognize -- of course, the president understands this and Republican leadership understands this- -that we have to do this together. There is no way we can...

    MR. GREGORY: But how do you do that, Mr. Secretary? The president just -- he simply gave the back of his hand to what Republicans were proposing.

    SEC'Y GEITHNER: Well, we've been talking very actively to Republicans throughout this process. We're going to continue to do it. I spoke with Senator Coburn on Friday, I spoke to Senator Conrad on Thursday. We sat with Alan Simpson and Erskine Bowles , who chaired the bipartisan commission in the Oval Office on, on Thursday. And absolutely we have to do this together. But I think if you -- again, if you listen carefully and listen carefully to this debate now, you're seeing both sides say we need to do about $4 trillion in deficit reduction between over a period of about 10 to 12 years. We disagree on how we want to do it, but we want to do -- what we want to do now is, again, because the world 's watching us, David , we want to find where we can agree -- and we can agree on the broad targets and make sure that we lock that in, and that'll give us a little bit of time to work out our disagreements and things like taxes .

    MR. GREGORY: But tax hikes won't hurt economic recovery?

    SEC'Y GEITHNER: No. The -- absolutely. This -- the important thing for people to recognize about this, fixing our fiscal problem is going to require us doing tough things. Things again, that are going to touch all Americans .

    MR. GREGORY: But to that point...

    SEC'Y GEITHNER: But -- hold on just one second.

    MR. GREGORY: Yeah.

    SEC'Y GEITHNER: But it's very important to understand this, OK? But we can do this, we can handle this without putting an undue burden on the economy as a whole and without adding to the burden of the middle class . It is perfectly within our capacity as a country , a you do not need to make savage, deep cuts in these entitlement programs to our seniors , commitments we made for generations. You do not need to abandon those commitments in order to bring our -- some balance to our fiscal budget . You can reform them...

    MR. GREGORY: You talk about -- yeah, you talk about the proposal that Chairman Ryan has in the House to change Medicare basically as we know it, change it into a voucher program, as they say a premium support program. The incoming head of the Democratic National Committee , Representative Debbie Wasserman Schultz , she called that plan "a death trap for some seniors ." Do you agree with that?

    SEC'Y GEITHNER: Well, if you look at what CBO said, the Congressional Budget Office , which is the independent, nonpartisan arbiter in -- and an analyst in this the Congress relies on, what they said is that plan, if enacted, would raise the cost of Medicare to seniors by about $6,000 a year. Now, that is a major shift, a major increase in the burden on the elderly. And the reason why that is in their plan is, in part, because he wants to maintain these tax breaks for the top 2 percent of Americans .

    MR. GREGORY: But he also argues, "Look, if you're serious about this, you have to do something fundamental." The president, in his plan, did not -- all he said was, "We're going to set up a group to work on some of the areas where we can try to reform Medicare ." Is that really a serious way to reform that?

    SEC'Y GEITHNER: No, I'll tell you the difference in the strategy, OK. In one strategy, which is the president's strategy, we have to put in place in reforms that reduce the cost of health care to all Americans , reduce the rate of growth in costs, and that's a very complicated and very difficult. It requires a comprehensive framework of reforms for changes how we use health care in many ways. What the alternative strategy you heard, you heard House Republicans embrace is to shift the burden of costs to seniors in ways that make health care more expensive for seniors and will not reduce, will not help get us get ahead of this problem. And what the president proposed are -- they're difficult and they're very difficult substantive reforms, and they'll be -- they'll face a lot of opposition. And the choice is not, again, not whether to reform , it's just, it's just how you do it.

    MR. GREGORY: The real question I think is whether it's possible between now and election, rather than entitlement reform , can you get tax reform done? And here's the cover of

    Bloomberg Businessweek, "How to Pay No Taxes: Eleven Shelters , dodges, and rolls -- all perfectly legal -- used by America 's wealthiest people ." Talking about companies like General Electric that didn't pay taxes last year, other companies that have been targeted, Google and others. Are there too many loopholes out there?

    SEC'Y GEITHNER: Absolutely. And it makes the system unfair. It means that companies are not paying taxes on the basis of the strength of their business. They're paying taxes on the basis of, you know, how good their lobbyist was. And that's an unfair, untenable system, and it's bad for the economy .

    MR. GREGORY: GE , of course, says, look, they had big losses in GE Capital . They did pay taxes , certainly, around the world and, and in states . That that's kind of an unfair knock. Do you look at, not just GE , but other companies, and say this is a system that has to end?

    SEC'Y GEITHNER: Well, what we want to do is have a corporate tax system where we have a lower corporate rate, and we clean up these special tax shelters , special tax expenditures to make sure we can afford to do that, not add to future deficits. But the key thing is to do this in a way that makes the economy stronger, more competitive, and makes it more likely that these great companies in the world build their next plant in the United States . So you want a tax reform -- you want a corporate tax system that makes it more likely, that encourages investment in this country . That'll make it stronger going forward. And we think we can do that. And, and this is an area, David , where I think you're going to find broad bipartisan support.

    MR. GREGORY: Is this doable do you think?

    SEC'Y GEITHNER: I do think it's doable, absolutely.

    MR. GREGORY: This year?

    SEC'Y GEITHNER: And I think -- I do think it's doable this year. You know, we have to see. You know we're -- I think we're going to see Democrats and Republicans come together to pass a set of very good trade agreements to expand exports. We're going to see if we can do something in corporate tax reform together. And again, you know, I know this is a political moment and there's a lot of rhetoric out there, but if you listen carefully to what both sides are saying on the deficits, we've got the same basic view on how much you have to do to bring our deficits down so we start to pay down our debt. And we'd like to see Congress lock that in.

    MR. GREGORY: Full disclosure, when we're talking about General Electric , it is a partial owner of NBC News , and I want to make sure I'm very clear with the audience about that. Final question for you. Would you stay on to serve a second term as treasury secretary?

    SEC'Y GEITHNER: David , I can tell you this, I got a lot on my plate, I enjoy these challenges, I believe in them, but I'm not going to make news on that today.

    MR. GREGORY: That's not, that's not a no. In our business that's not a no.

    SEC'Y GEITHNER: We're going to do this again. I got a lot I'm doing, I enjoy this work, I enjoy a challenge.

    MR. GREGORY: But you could, you could, you could imagine staying on because the challenges are so great.

    SEC'Y GEITHNER: Again, David , when I'm, when I'm going to make news on this, I'll let you know. You won't be the first person, but I'll let you know.

    MR. GREGORY: But close? Mr. Secretary, thank you very much .

    SEC'Y GEITHNER: Thank you. Good to see you.

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