Business

Geithner Urges More Spending, and Tax Reform

Geithner Urges More Spending, and Tax Reform

Treasury Secretary Tim Geithner spoke with Bloomberg Television’s Peter Cook from Los Angeles last night, where he discussed the European debt crisis and the U.S. economy.

Geithner said that European leaders must take steps including “bring down interest rates in the countries that are reforming and making sure those banking systems can provide the credit those economies need.”  He also said that “they are committed to doing what’s necessary to hold the European Union together” and “I absolutely believe they have the means to do it.”

On the U.S. economy, Geithner said, “there’s a lot of things Congress can do, in the near term, not just in the long run, to make growth stronger” and “if you listen closely, there is a lot of bipartisan work going on in Congress, trying to lay a foundation for how to work through these problems…”

When asked what he’ll do after leaving the Obama administration, Geithner said, “I haven’t had a chance to think about that much…I will think about it. But I’ve got a lot going on at the moment.”


Geithner on meeting with Mario Draghi and Wolfgang Schaeuble:

“We talk all the time on the phone, but sometimes there’s no substitute for just sitting there together and doing it in person.  You know, it’s like in normal human relations, sometimes that’s very important to do.  We walk through all of the major issues facing the U.S. economy, the global economy, of course Europe.  And what they did is walk me through the plans they’re putting in place to try to solve this crisis for them, not just for the near term, but for the long run.”

On whether we’ll see something new from the ECB tomorrow:

“I can’t speak to monetary policy. I don’t do that ever. But what you know from what Europe said is that they are committed to doing what’s necessary to hold the European Union together. And to make that work, they need to not just make sure they’re doing reforms to make those economies more competitive, and they need to build a stronger set of institutions on budget disciplines and better management of banking systems. But they also have to do some more things to help support growth in the near term.  And that means bringing down interest rates in the countries that are reforming and making sure those banking systems can provide the credit those economies need. So they’re trying to work on a strategy, a comprehensive strategy with those elements, and they recognize that they’ve got some more work to do to try to restore confidence in their commitment to do that.”

On whether he believes this time around is different for Europe:

“I think you have to look to the leaders of Europe, and you have to look at what they say, and you have to ask yourselves not just what do they say they’re trying to do, but do they have the means and the ability to do that.  And I absolutely believe they have the means to do it.  Now, it’s not fair to say they haven’t been acting.  I think over the course of the last two and a half years, they’ve done a lot of things trying to build a stronger, more viable European Union.  Of course, they recognize they have more work to do.  And some of these teams are going to take a long time.”

On whether he believes that too much delay in Europe could boost the overall cost in the long run:

“I think they understand this now.  But ultimately, of course, as you see in financial crises throughout history, there’s a risk that the more you wait, the costly the overall crisis grows.  And, of course, the economic costs and the political costs grows with time, too. And I believe they understand that, and that’s why they signaled that they are prepared to move further now. This is going to take time.  They’re going to be living with this for some period of time.  And they’re trying to make sure that they’re not just building for the long run but they provide a bridge for those long term reforms.”

On what’s at stake for the United States right now:

“Huge stakes relative to the global economy. You know, Europe has roughly one third of the global economy.  I think we all have a huge strategic interest in Europe being stronger, not weakened by a long protracted crisis.  And, of course, the human costs are acute in this crisis even already, not just in Greece, but throughout other countries in Europe, too.  And the political costs in terms of rising extremism are terribly troubling.  So we have a huge stake.”

 

On whether Bernanke is the only authority who can help the U.S. economy in the short term:

“It doesn’t need to be that way.  Again, you know, we pay about 1.5% for a 10-year treasury now to borrow long term because fundamentally people have faith in the ability of the U.S. to solve those problems. And it’s sensible for us to take advantage of this moment to do things to help make the economy stronger.  So we think there’s a lot Congress can do, not just extend tax cuts for 98% of Americans or the 25 million Americans who depend on these refundable tax credits like the expanded shelter childcare tax credits, but they can do a lot more do help people refinance, take advantage of lower interest rates.  They can do some targeted tax incentives for businesses to invest and to hire. There’s a lot of things Congress can do now and should do to help make the economy stronger in the short term. You know, we’ve made a lot of progress over the last three years.”

On the argument that the best thing for the U.S. economy in the short term would be to extend the Bush tax cuts:

“I don’t share that view.  I know there are people who think that if you put off these problems, they’ll go away, and somehow that would lift the dark political cloud over the economy.  I don’t share their view…I don’t think there’s a strong argument in favor of it.  All that does is put off returning Washington to the point where it can actually govern and do things good for the economy.”

On whether he favors President Obama sticking to his guns on the Bush tax cuts and heading right over the fiscal cliff:

“I’m don’t share that view either, again, you have to think about what is the most sensible, responsible, effective way to help repair the damage caused by the crisis, make sure we’re doing things to help strengthen long term growth, and give Americans more confidence. If we’re going to go back to living within our means, I don’t see how you improve confidence of the American people in those fundamental challenges if you put everything off, and it would seem to be a remarkable thing for this country at this moment in history to say, ‘We can’t solve the problems, we can’t find principle compromise, and so we’re going to put the economy through a wrenching trauma as a way to force political consensus.’  It doesn’t seem like that should be necessary, and I think, if you listen closely, there is a lot of bipartisan work going on in the Congress, trying to lay a foundation for how to work through these problems, how to replace those expiring tax cuts and the automatic spending cuts with a more sensible balanced package of reforms that again reduce those long term deficits, make sure we’re strengthening people’s confidence in the safety net for retirees, tax reforms that raise the modest amount of revenue, and we preserve some room to invest in things that are important for growth. That’s what we’re going to try to achieve.  And I think you’re going to find very broad support for that.”

On whether the bigger risk right now is the fiscal cliff or the situation in Europe:

“They’re fundamentally different situations.  The European crisis is a mucmore grave risk to the global economy and our own economy, what people call a fiscal cliff is something completely within our control, it’s a political challenge, not an economic challenge, and there are many different ways to make sure that we can manage through that if we can get people to embrace a balanced program of fiscal reform.”

On the LIBOR situation:

“I think it’s very important to our country in the broader challenge of trying to restore trust and confidence in the financial system of having an enforcement response that’s very powerful and credible. That’s very fundamentally important. That requires not just that we have sensibly designed, tough rules over the financial system, but as important that we have people who can enforce those rules with the resources to enforce them, so we’re going to fight for that.  I do think it’s important we take a careful look at how to make sure that we can deal with the potential implications of this for the broader financial system, put in place reforms that can engender more confidence, and, of course, there’s a whole range of other things we got to look at carefully as we go through this.”

On whether he feels good about how the LIBOR situation was handled:

“I do…yes…I’ve thought a lot about this, and I really believe that we did the necessary and appropriate thing because when confronted by concerns about exactly this, we took action, did not just push the British to reform it, but to make sure that we briefed the full complement of U.S. regulatory authorities.  And as you know, in roughly that same time frame in the spring of 2008, the FCC, to its credit, began a far reaching, broad investigation, and that’s important to, again, the broader credibility of our system.  You got to make sure that people have the resources to do that.  We want that to happen, and that’s important to make sure you deter this kind of behavior in the future.”

On attacks by the Obama campaign on Romney’s business background:

“I’m very comfortable with the policies this president has pursued and the things we’re going to try to make this economy stronger.  And as part of that, we think we need a sensible, tough, much tougher financial rules to protect the economy from the mistakes the financial system makes over time.  And we think we need to have some sensibly designed tax reforms as part of comprehensive fiscal reforms so we’re living within our means again so we can protect things like the safety net for retirees and investments in education and infrastructure, better incentives for private investment, basic scientific research.  Those are things that I’m for.  I think they’re very important to our long-term future, and I’m very proud to help the president pursue those policies.”

On what he’ll do after leaving the Obama administration:

“I haven’t had a chance to think about that much.  I will think about it.  But I’ve got a lot going on at the moment.  You know, I love my work.  These are important challenges.  And I’ll think about that question when I have the chance.”

On whether he’d be open to the idea of working at a bank:

“I don’t want to contemplate any basic questions about my future until I get through the near term challenge facing the country…I’ve been in public service all my life.  Deep privilege for me to do that.  I love this work and believe in it.”

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