On the second anniversary of the Lehman Brothers collapse, Treasury Secy. Tim Geithner discussed the crisis with White House correspondents Chuck Todd and Savannah Guthrie today on "The Daily Rundown."
Transcript is below. If used, please credit MSNBC.
CHUCK TODD, HOST: Joining us now, Treasury Secretary Tim Geithner. He's on the White House North Lawn. We apologize in advance, but we feel your pain, Mr. Secretary, because we deal with that noise every day with that construction behind you.
Mr. Secretary, you were at the center of this storm when you were at the New York Fed. Do you have any regrets today that between you, Fed Chair Bernanke, and then-Treasury Secretary Hank Paulson, that the three of you didn't figure out a way for the government to save Lehman Brothers?
SECRETARY TIMOTHY GEITHNER, U.S. TREASURY DEPARTMENT: We would have done it if we had any capacity to do that, absolutely. That would have been the right thing to do. But the tragic failure of this crisis was that we did not have the tools to limit leverage, limit risk-taking in some of the largest financial institutions in the country. And when they made a bunch of tragic mistakes, we didn't have the capacity to wind them down and break them up without huge damage to the rest of the American economy. Those were the basic failures of policy that helped lead to the crisis and that's what the financial reform bill corrects.
SAVANNAH GUTHRIE, HOST: Well, I want to move on to an issue that's current today, and that is, of course, the tax cuts, and whether to let the tax cuts expire for the wealthiest of Americans.
My question to you is, we all know the president's position, your position that the Bush tax cuts for the wealthiest should be allowed to expire. There are a lot of people who say, look, this imperils the economic recovery and frankly, some Democrat who is say, why don't we just do a compromise here and freeze them for two year years.
I mean, is there not room to compromise on this? Are you open to a compromise like that?
GUTHRIE: Savannah, if you put the politics aside for a moment -- I know we're in a political moment -- but if you put those politics aside, what we're having is a debate about what is the right policy for the country now.
And the three key tests of policy now should be the following: what's going to be the best for middle class Americans; what's going to be the best for sparking business investments so we get job creation stronger and more quickly; and how to do those things in a way that's going to be fiscally responsible.
And what's the president's proposed is absolutely the most responsible path for the country, which is to extend the middle class tax cuts right now. Remember, those go to not just 98 percent of Americans, but about 98 percent of small businesses across the country; make sure we're not going to let dividends, capital gains rate rise, so we keep taxes on capital investment low. That's very good for confidence. There's no reason to delay that. But what we also want to do is provide new incentives for businesses to invest, get people back to work more quickly.
What separates us is there are some people in Congress who want to permanently extend the tax cuts at the high end, the richest two percent of Americans and that costs $70 billion. We think that would be irresponsible. And the people who want to do it temporarily, really want to do it so they can maximize the chance we do it permanently. That's why we're having this debate. We don't think that would be responsible.
TODD: All right. Well, Mr. Secretary, then, how about another part of this compromise. Why not find a way to make sure those two percent of small businesses that would be affected by a tax increase are somehow exempted, number one. And number two, if this is about millionaires and billionaires, then draw the line at $1 million.
What's the magic about $250,000 and not $1 million, and then, frankly, the political rhetoric matches the facts?
GEITHNER: Those lines were drawn by President Bush and then the tax cuts that President Bush asked Congress to pass and Congress passed drew that line there.
Now, again, that's just the most fortunate, the highest earning two percent of Americans and two percent of small business. And what a lot of people are calling small businesses are really partners in law firms, and a huge share of that income goes to businesses, partners in hedge funds, partnerships -- partners in law firms that make a very substantial amount of money.
Again, we have to make choices. We don't have unlimited resources. We want to find a mix of packages that is fiscally responsible, is good for the middle class, and provides the best bang for the buck in sparking business investment. And the president's proposals do a better job of doing that.
GUTHRIE: You mentioned that just as recently as this week that these large tax cuts for the wealthiest Americans were passed without any way to pay for them. And that's true. However, the same could be said of the middle class tax cuts your administration is now advocating --
GEITHNER: No, that's not true. That's not true, Savannah.
GUTHRIE: Republicans aren't suggesting a way to pay -- OK.
How are the middle class tax cuts being paid for in the budget?
GEITHNER: The pay-go rules, these are the basic budget disciplines that were put in place in the '90s and were abandoned in the succeeding last decade, they pay-go rules that Congress passed at the end of last year, provide a way to extend in a way that is fiscally responsible, those middle class tax cuts.
Now, what again is not responsible is to go out and ask the American people to ask me to go out and borrow another $700 billion over 10 years from investors around the world, ultimately our children will pay that cost, and add that to our future deficits. That is not good stimulus, it’s not good support for the economy. Much better to provide targeted support for business investment today.
GUTHRIE: OK, so to be clear, you don't have to borrow to do the middle class tax cuts. That's not deficit spending?
GUTHRIE: We believe -- and we laid out a path to do this -- that extends those tax cuts in a way that is fiscally responsible, helps bring down our long-term deficits in a way that gets us much closer to sustainability.
What some in Congress are proposing is, we think is, I believe is just irresponsible. Again, it's asking us to go add another $700 billion to our nation's debt over the next 10 years to extend tax cuts which have a terrible record in helping economic growth and helping spark business investment. It's just not a good use of limited resources.
TODD: Mr. Secretary, why do we think that -- look, there seems to be -- the fact is, the American consumer is not responding the way all of you assumed the American consumer would. You put something like $300 billion of the stimulus into the pockets of the middle class because you thought it was going to spur consumer spending. It did not.
Was that a wasted tax cut because that money was used to pay down debt? It did not spur the consumer spending?
GEITHNER: Actually that’s not a good reading of the data so let me just describe it this way. It is important to recognize that when you’re coming out of a financial crisis that was produced in part because people were living beyond their means. Those recoveries are harder, they’re slower, they take more time, they’re more choppy, they’re more uneven because people have to go back to living within their means. That is necessary, inevitable.
But because of the tax cuts and the Recovery Act, because of the support the government provided, the incomes Americans said were much larger than they otherwise would be. In fact, spending by Americans has actually been reasonably healthy in the early state of this recovery.
Now, we’re not growing fast enough to put people back to work as quickly as we would like. It's worth noting, you know, that private sector job growth came quicker in this recovery than it the last recovery. We've had almost three quarters of a million jobs come back already. That's not good enough, though.
And our job, again, is to make sure we're getting more people back to work more quickly. The best way to do that is to give middle class Americans certainty that their tax treatment is going to be extended and to give businesses, targeted investments to encourage investment in this country.
GUTHRIE: And before we let you go, sir, we have to ask you, will Elizabeth Warren be announced this week as the head of the new Consumer Bureau?
GEITHNER: The president's going to speak to that soon. But what we're focused on is making sure that these financial reform laws deliver the stronger protections Americans deserve in how they use financial products more responsibly. That's what this bill does and we want to make sure we have the strongest possible leadership to get off a strong start in providing better protections, more simple disclosure. That's what we're focused on.
TODD: Mr. Secretary, before we let you go, can you guarantee by the end of 2011, we will have a month where there is more than 300,000 private sector jobs created?
GEITHNER: What I can tell you is that our responsibility here in Washington, as we try to heal the scars of this crisis, is to do everything we can to make sure the government is helping that process, not hurting it. Helping businesses add/get people get back to work more quickly and that’s what we’re going to keep on doing. And we’re going to keep at it until we get that done.
TODD: So no guarantee? No guarantee, though, by the end of next year?
GEITHNER: If Washington does sensible things, we will have job growth stronger, more quickly.
GUTHRIE: All right. Treasury Secretary Tim Geithner. Thank you for joining us. A very noisy White House north lawn.
TODD: Yes. Thank you for your patience.
GUTHRIE: I wonder if that's a Recovery Act project, sir, behind you. I don't know if you know.
GEITHNER: Nice to talk to you guys.
GUTHRIE: OK, take care.
TODD: Thank you, Mr. Secretary.