Geithner said that Obama’s plan represents “the best mix of policies” for promoting short-term economic growth and cutting long-term debt. He also said that Europe will follow “lessons” of the U.S. crisis.
“We’ve got to try and work through it,” Geithner said, when asked about House Speaker John Boehner’s comments on Obama’s tax plan and avoiding gridlock in the super committee. “I think you’ve heard Republicans and Democrats say that we’ve got unsustainable deficits. We should do more to help the economy in the near term,” Geithner said. “The president’s laid out some proposals for doing that. And we think they’re good ideas. We think they’re good economics. We think they’re better for the economy than the alternatives. And we’re going to try to get them done.”
When asked by Goldman why Americans shouldn’t see Obama’s tax plan as a political statement as we head into the election year, he said the president is asking himself, “What do we think is the best for growth in the short term so more Americans get back to work?,” adding that it’s “fairest, most sensible way” to bring down the long-term deficits, create some room for investments and things that make us stronger in the future.
“Now, we’ve laid out a detailed proposal for doing those two things to help the economy right now, help strengthen growth over the long run,” Geithner said. “Now there are some other ideas out there, and we’re going to have a debate about what makes sense for the country. But I think there’s broad recognition across the political spectrum that we can’t just push off the deficit problem forever. It’s something we got to deal with now. And if we can deal with it sooner, it’ll be better for confidence in the United States.”
Turning to the so-called Buffet Rule, named for billionaire investor Warren Buffet’s proposal that those individuals making over $1 million pay at least the same percentage of income in tax as ordinary wage earners, Geithner responded:
“What the president’s laid out is a set of principles, objectives for tax reform … so the Buffett principle, which is a principle that says that if you make more than $1 million a year in the United States you should pay no less as a share of your income than the average middle-class family. That’s a simple, basic principle; one principle of many. And we want to try to lay the foundation for comprehensive reform that meets that test … overall, of course, we want to make sure that people are in the best position to bear more of the burden for solving our problems as a country.”
When Goldman then asked Geithner about what he needs to see from Europe to ensure Greece can avoid a default, he noted the pressure Europe is under.
“We as a country have a huge stake in them solving this problem, and we are doing as much as we can to help them put in place a stronger package of financial measures,” he said. “Ultimately, it is up to them, but we have a big stake in helping them do that.”
Goldman concluded by asking about the spread of the “contagion” to the banks in the United States, given their level of exposure to European markets.
“One of the great strengths of this country was when we were faced by crisis we moved very quickly and aggressively to strengthen our financial system and bring capital into the financial system,” Geithner responded. “The U.S. financial system is in a much stronger place now to deal with any of the challenges we face in the future, not just from Europe, than we were before the crisis. We are in much better position to handle those shocks from whatever the source is because we were aggressive early on making sure the banks are a much stronger financial position.”