When asked if he agreed with Alan Greenspan that the debt ceiling should be eliminated, Treasury Secretary Tim Geithner responded, “Oh, absolutely.” Geithner was also optimistic, believing a budget deal could be struck within two weeks.
These were some of the revelations to come from his interview on Friday with Bloomberg TV’S “Political Capital with Al Hunt.”
AL HUNT, HOST, POLITICAL CAPITAL: We begin the show with Treasury Secretary Timothy Geithner. Mr. Secretary, thank you for being here.
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TIMOTHY GEITHNER, TREASURY SECRETARY: Good to be here.
HUNT: Friday morning, meeting at the White House, you were there with the congressional leaders, John Boehner, Barack Obama. Did you come away – first of all, were there any specific numbers put out there for a framework agreement? And did you come away encouraged or not?
GEITHNER: It was a good meeting, and the tone was very good. And you heard each of the leaders say coming out that it was a very constructive meeting. You know, they said what you’d hope for them to say at this point, which is that this is something we can do, we’re committed to do it, we want to do it as soon as we can, we know the stakes are very high. We know there’s a lot of tough -
HUNT: But they’re not – too soon for specifics. I mean, not talking numbers yet about taxes or entitlements?
GEITHNER: Well, I think we try to – we’re trying to get and make sure people have a common assessment of the magnitude of the additional savings you have to find from revenues and spending to get the deficit to a point where they’re sustainable and how to make sure we’re doing things that help the economy.
So I think, on broad areas of magnitude, we’re trying to make sure we have a common assessment of what’s necessary, and then, you know, again, we have the hard stuff ahead of us still. But it was a good meeting.
HUNT: On short term – in short term, the tough issue is the Bush tax cuts. Both sides have had a different view on that. Rob Portman and others are saying, hey, how about this? How about extending the tax cuts for the rich, as well as everybody else, for six months with a trigger, that if you don’t come up with the amount of savings, it automatically then reverts in July to 39.6 percent? That way you get the savings guaranteed, and they get to keep the tax cuts for a while. Would you accept that?
GEITHNER: Well, without – I don’t want to comment on every specific idea out there. Let me tell why in general I think deferring things doesn’t work. You know, we’ve had several periods now where there was a choice made to defer.
GEITHNER: And if this political system again, with all that’s at stake for America, decides to defer again, in the hopes that Americans will give us more time to come together, I think you’ll – I think it would be a mistake.
HUNT: Even -
GEITHNER: I think you leave – you leave this huge cloud of uncertainty hanging over the economy. And more importantly, perhaps, you reduce the incentives both sides now have to come together.
HUNT: But even with an automatic trigger, that it would take effect -
GEITHNER: Well, you know, we’ve tried several automatic triggers, and they can have some value, but I think that – and I believe this view will prevail, and I think this is a view held by the people that’ll be principal to an outcome, principally responsible for the outcome, which is you have to lock in upfront enough savings so that people believe there’s going to be meaningful change ahead.
HUNT: You think you can do that?
GEITHNER: If it’s all a promise, then I think it has less credibility.
HUNT: You think you can do that in a lame-duck session?
GEITHNER: Oh, I think you can do a lot in a lame-duck session.
HUNT: You do?
GEITHNER: Yeah, I do. I do think we can.
HUNT: Really get specific savings?
GEITHNER: I think you can do a lot in a lame-duck session. You don’t need to solve everything in that context, but I think what we’re trying to do is to come up with a – I think the word people use is a framework agreement that sets up a process for locking in long-term savings, but you have to do a meaningful amount of things upfront. Now -
HUNT: But the Bush tax cuts would then expire?
GEITHNER: Well, of course, that’s our view. That’s the president’s view.
HUNT: And you think that’s what will prevail?
GEITHNER: I do think that’s what’ll prevail. But can I just one thing in this context, which is, you know, what we’re focused on is not just how to make sure we’re living within our means as a country. Again, that’s very important. But we want to do things that are going to help make the economy stronger in the short term. And so extending these middle-class tax cuts are central that. That’s probably the most important thing you could do to defuse many of the risks in the fiscal cliff. But there’s other things we think we can do upfront, too, and that’s important to keep in mind.
HUNT: Let me just stay one more question – keep one more question on the taxes, because you have said it’s very hard to find the revenue to offset letting the Bush tax cuts for the wealthy – but I look at your proposal, the 28 percent cap, at a cap of 20 percent rate, and that raises over half the revenue that you would get from the Bush tax cuts. Congress resisted that, of course. But if you could get something like that and they went along on capital gains and dividends and the estate tax, they being the Republicans, could you cut a deal then and keep the Bush – keep the tax rates at higher than – or lower, rather, than 39.6 percent?
GEITHNER: Well, Al, you know, the president spoke to this earlier this week, to that same basic question. And I’m not going to add to what he said in this context. But let me say what you have to look at in this context. First of all, you have to look at, how much revenue do you need to make sure you have a balanced deal to get this back to the point we’re living within our means? That’s going to require a substantial amount of revenue, we think in the neighborhood of $1.5 trillion to $1.6 trillion.
Now, alongside, a very substantial amount of spending savings, too, in that context. And if you look at how much revenue you need to raise and you want to make sure you’re protecting the middle class from bearing a larger burden than they already have for this economy, then it is the – the math does not make it possible -
GEITHNER: – to do that without higher rates.