Transcript: George Interviews Timothy Geithner

Aug. 3, 2010 — -- Treasury Secretary Timothy Geithner sat down for an interview with "Good Morning America" anchor George Stephanopoulos on Monday, Aug. 2, 2010. The following transcript of the interview has been edited for clarity.

GEORGE STEPHANOPOULOS: Mr. Secretary, thanks for joining us.

TIMOTHY GEITHNER: Good to see you, George.

STEPHANOPOULOS: In your speech today, you say that the economy is healing. But I guess the question for a lot of Americans is how quickly? Alan Greenspan said over the weekend that we're actually in a pause in the recovery. Is he right?

GEITHNER: It's a tough economy still for a lot of people. And the crisis was brutal. Businesses across the country, they just-- just cut savagely into investment and into payroll when the crisis was at its peak. But we've had now a year of growth. Private sector jobs coming back, not as fast as we'd like but they're coming. They're starting.

STEPHANOPOULOS: And not as fast as you expected it to either.

GEITHNER: Actually, in some ways it's stronger than we expected. We did not think we'd have -- the economy would bottom so quickly, growth back this quickly, this strong, and actually this much job growth this quickly. Now, again, parts of the economy are still very hard, very tough. But a lot of the economy is getting stronger.

And if you look at the numbers last week that tell you what's happening to the economy as a whole, what they showed is-- is the private sector is getting stronger. So if you'd add together business investment and consumption, that part of the economy, which is what matters for the future, is getting progressively stronger and that's very important. So you take out the government, take out inventory, the private sector of the American economy is investing again. And that's very promising.

STEPHANOPOULOS: Starting to. But I remember we talking back in December and-- and you all expected and others in the administration expected steady job growth over the course of the spring. And that hasn't what we-- isn't what we've seen.

GEITHNER: Well, again, I think you're seeing generally businesses, they're certainly investing again. Business investment was up 20 percent in the second quarter, very strong despite what some people say is concerned about uncertainty, a lot of strong investment.

You're seeing hours increase, people bringing back hours. And private job-- sector job growth is increasing. Now, in the spring you had a significant thing happen, which is you had a lot of concern about Europe falling apart. And that caused another blow to –

STEPHANOPOULOS: It was a setback.

GEITHNER: It was a setback. And you saw equity prices fall a lot over that period of time. But Europe's moved now to bring a little more stability back. You're seeing confidence start to return there. That's encouraging. That was just a temporary thing.

And I think, again, if you look at the part of the economy that matters, which is not the government, not what the government's doing. Look at what businesses are doing across the country. You look what's happening to spending. That private measures demand are getting stronger, and that's encouraging. Still very tough. Long way to go. It's going take a while to heal a lot a while to repair the damage.

STEPHANOPOULOS: Should Americans be prepared for unemployment to go up before it goes down?

GEITHNER: You know, it's-- it's possible you're going have a couple months where it goes up because, you know, one-- one thing that happens in recoveries, George, is that people start to come back into labor force. When they see a little hope that there may be jobs out there, they start to come back in again.

And that can cause the measured unemployment rate to go up -- temporarily. But what we expect to see and I think most forecasters expect this, private forecasters expect this, is an economy that's gradually healing, gradually strengthening, businesses starting to add people back. Of course, we want to do what we can to reinforce that process-- because it's not growing back as quickly as we'd like.

STEPHANOPOULOS: You say you want to do-- you want to reinforce that process. A lot of-- observers, partisan and not, look at the President's -- commitment to -- ending the -- allowing the tax cuts on the wealthiest Americans to-- to end as a job killer. I was speaking to Newt Gingrich. He said it's "crazy" to go through with this plan.

Some non-partisan economists agree. And your own CEA head put out a paper in June that said tax increases are highly contractionary. So how do you respond to those who say you're putting this fragile recovery at risk?

GEITHNER: Well, let me tell you what we're proposing because it's very important to start with that. We're proposing to extend tax cuts that go to more than 95 percent of working Americans, more than 95 percent of small businesses across the country. We want to provide targeted investments for businesses so they're increasing investment, getting people back to work again.

We think that's the best approach for the country. Now, to make that possible, to do that in a way that's responsible, we also think it makes sense to let those tax cuts that only go to two percent of the highest earning Americans in the country to expire as scheduled. If we do that then we can ensure the Americans, ensure the world we're willing to-- we're going to start to make some progress bringing down a long-term deficit.