U.S. Treasury Secretary Timothy Geithner, as expected, backed President Barack Obama’s budget plan on Tuesday, saying the government must resolve its debt ceiling crisis well before Aug. 2 and bring its deficits down “gradually but dramatically” over the next three to five years.
In remarks given at the Harvard Club in New York just one day after the Treasury hit its debt ceiling, Geithner (left) spoke of unsustainable future fiscal deficits caused in part by the many Americans who will turn 65 in the next decade.
The text of the Treasury secretary’s remarks, “A Conversation on the Economy and Our Fiscal Challenge,” was liberally sprinkled with references to Obama’s budget proposal, including a framework that proposes changes to the tax code that will reduce the deficit.
Pointing to the debt ceiling during his Tuesday evening speech, Geithner blamed the Republican-led Congress for not acting and thus forcing the Treasury to deploy a series of extraordinary measures to prevent default.
“I want to emphasize again that if a fiscal agreement is not reached in the coming weeks, in advance of August 2nd, then the debt limit must still be increased,” Geithner said. “It simply is not an option for Congress to evade the basic responsibility to protect America’s creditworthiness.”
The Treasury secretary pointed out that the debt ceiling is a constantly moving target, and has in fact been raised 70 times in the past when government spending has overshot its budget.
Geithner also accused the Republicans in Congress of offering a budget proposal that would raise costs for Medicare beneficiaries by $6,500 a year and reduce how much the government spends as a share of the economy, aside from interest and Social Security, to a lower level than at any time since World War II.
“The essential contribution of the House budget is to show that if you try to deliver fiscal sustainability with no contribution from tax reform, then you have to make drastic cuts to critical government functions,” Geithner said.
“By restoring the tax rates on individuals earning more than $250,000 to their level during the Clinton years, returning the estate tax to 2009 rates, and scaling back tax expenditures, the President’s plan would generate additional revenue, without putting at risk future incentives for investment or growth,” Geithner said.
In addition to his frequent references in support of the President’s agenda, Geithner stressed his own aversion to politics.
“You can tell I’m not a political person. My staff tells me I can make anything simple sound complicated,” he said in a veiled reference to the House Republican budget written by Rep. Paul Ryan (R-Wis.). “The hardest thing to do in economic policy is to explain why the simple plan won’t work.”
Read more about the debt ceiling crisis at AdvisorOne.com