I sat down for an interview with Tim Geithner yesterday. Here is the full transcript:
GEORGE STEPHANOPOULOS: Mr. Secretary, thanks for doing this.
TIM GEITHNER: Nice to see you.
GEORGE STEPHANOPOULOS: So it looks like this deal is going to pass– and that turns the bigger question of the underlying economy and what it means for the underlying economy. And what do you say the argument of a lot of economists who say that cutting spending, deficit reduction like this, right now, is going to make a weak economy weaker?
TIM GEITHNER: Well, let's start with what this deal does. The most important thing is it creates more room for the private sector to grow because although it locks in some very substantial long term savings, the near term cuts are very modest. So that– that was the really critical thing in making sure that this economy continue to grow and recover. Now, it locks in a very big down payment and it sets in motion what we think is going to be a very effective process for forcing congress to come together—
GEORGE STEPHANOPOULOS: But don't you think that any deficit reduction now will — will hurt the attempts of the economy to recover?
TIM GEITHNER: You know, I think the — basic reality we live with and, you know, part of governing is recognize we live with — we don't have unlimited resources, and we inherited and are left with unsustainable deficits long term. And the president understands that for the sake of the economy long- term it's very important we demonstrate to the American people, to people around the world that we can get our arms around this and start go back to living' within our means.
Now, we want to do that very carefully so we create room for the economy to grow and we have the resources necessary to invest in things that are going to be very important to the future like education, like infrastructure, like incentives for private investment. And to do that, it is absolutely essential to lock in these long term savings. Now — the president was very strong on this and made sure that we were not going to accept spending cuts that would damage the prospects for near term recovery. Now, with this behind us, and we get this —
GEORGE STEPHANOPOULOS: So this won't cost us jobs?
TIM GEITHNER: No, it will not. Now … if we put this behind us then we can turn back to the important challenge of trying to find ways to make sure that we do everything we can to get more people back to work, strengthen our growth. And we'll have more ability to do that now with people more confident and we can start to get our arms around the long-term problems.
GEORGE STEPHANOPOULOS: Yeah, the president had to give up in … this deal– his call to extend the payroll tax cuts through next year.
TIM GEITHNER: Well I — George, I'm very confident that's going to happen. You know, again, I've been part of all these discussions. I've listened—
GEORGE STEPHANOPOULOS: How can you be so sure?
TIM GEITHNER: Well, because I think it's going to be very hard for Republicans to — to prevent that from happening. I think it's very hard for them to stand up and say that they're going to try to block the extension of that tax cut that's worth about $1,000 a year for the average American family. Untenable for them to block that. I think we're going to have to extend employment – unemployment benefits further, we need to get these trade agreements passed, there's other things we're going to have to try to do to start to lay the foundation for stronger growth. But a condition –precondition for doing that, 'cause again we're a country — we don't have unlimited resources and part of governing is recognizing that, is to lock in these long term savings so we have room to do that.
GEORGE STEPHANOPOULOS: But we've seen such weak growth this year, less than one percent so far this year. Are you sure that this economy's not going to slip back into a recession?
TIM GEITHNER: The economy is absolutely slower than we thought — than everybody thought, and that's happening around the world. Growth in the second quarter slowed, really, everywhere. Part of that is because of oil prices, part is because of Japan, what happened in Japan. But that's not all of it. And in the United States, I think confidence here was absolutely very damaged by this spectacle they've seen in Washington of a significant number of elected officials in this country threatening default — and really damaging the confidence, took– caused a lot of damage to confidence.
GEORGE STEPHANOPOULOS: To the point where it could cause a double dip?
TIM GEITHNER: I don't th– I don't think that that risk right now is very significant. You know, I just– I spent a lot of time talking to people running businesses across the country and I'll– I'll give you a sense of what they say. And they still say this today. Today. Not just last week and the week before.
They say that, you know, parts of the economy are still very weak. Construction is very weak, housing is very weak, and confidence, as– we just said, has been damaged. But if you look what's happened to exports, if you look at what's happened to investment spending, there's lots of encouraging signs of resilience, too. And, you know, our job is to make sure we're doing everything we can to make sure we encourage those.
You know, the United States is a very strong, very a resilient economy and we're in a very good position to benefit from the very rapid growth you're seeing in China, India, Brazil, emerging market economies. We're still, you know, among the most productive economies in the world–
GEORGE STEPHANOPOULOS: But we're not creating jobs.
TIM GEITHNER: Well, we are … not as fast as we like, but we have more than 2.2 million private sector jobs created since the job growth started. That's not enough. Long way to go. It just– that's just– that's just a function of how damaging the recession was.
GEORGE STEPHANOPOULOS: You just talked about the spectacle in Washington over the last three weeks. I think Americans are pretty fed up with, but there's also the real prospect. Even though default has likely been avoided, that America still– could still lose its triple-A credit rating. How concerned are you about that?
TIM GEITHNER: Well, again, I am very confident in the basic underlying strength of this economy and our long term growth prospects, and that's really the most important thing that matters in this context. But what this agreement does is it locks in very substantial, meaningful– savings up front they're facing over time—
GEORGE STEPHANOPOULOS: Enough to avoid a downgrade?
TIM GEITHNER: Well, let me get to that. And it sets up a very powerful mechanism with very strong incentives for congress to do additional deficit reduction, tax reforms, entitlement reforms over the next four months. And if they fail to do that, then what you see is automatic changes in spending across the board that would help– help get us back on a sustainable path.
You know, the Bush tax cuts expire at the end of 2012. That creates another incentive for people to act. And you know, again, I’ve been part of these discussions George from the beginning and I've listened to both sides, and I think despite all the political rhetoric and despite the spectacle of division, I think people have much more reality, much greater sense of reality now of what it's going to take. And I think they moved a long way, much closer together now, and we just (have) to try to make sure we build on that foundation. Because, you know, this– this—
GEORGE STEPHANOPOULOS: But do you believe the ratings agencies have bought that argument?
TIM GEITHNER: Well, th– you know, they're going to take a careful look. What– what rating agencies do is they look at two things. They look at the basic, underlying growth prospects of– of an economy, and they look at the capacity of a political system to make tough choices to live within their means.
And they're looking at that more carefully today. Because again, they're concerned, like all Americans have been concerned, about whether Washington can– can deal with these problems. But what this deal does is set up a very powerful mechanism in Congress to force Congress to confront the kind of change we're going to need. Now, of course, we want those done carefully over time in a fair and balanced way.
We make sure we create room for more investment in the future, better incentives for growth in this country. And again, I think that despite how it looks from a distance, I think there's more reality in Washington, more realism, people are coming a little closer together.
GEORGE STEPHANOPOULOS: But what happens if we’re if America is downgraded? Some economists estimate it could cost us $75 billion a year in interest costs, 600,000 jobs.
TIM GEITHNER: If Americans, or investors around the world, lose confidence in the capacity of Washington to deal with our challenges then what you'll see is higher interest rates for all Americans. And when interest rates rise, that's like a tax on all Americans. But again, what matters for us long term is that we do everything we can to make sure growth is stronger over time and we find ways to demonstrate it. We can get Washington to make the kind of tough choices we need. This is a —
GEORGE STEPHANOPOULOS: It sounds like you’re not sure a downgrade's going to be avoided?
TIM GEITHNER: I can't– it's not my judgment to make, and if they have to make that judgment. But– you know, this is a — in some ways, a judgment on the capacity of Congress to act. And what this deal does is put us in a much better position to make those tough choices because the down payment's pretty strong and this special committee, this mechanism for the reforms is a much more powerful device than we've had in the past.
GEORGE STEPHANOPOULOS: Has the way this whole process unfolded made a downgrade more likely?
TIM GEITHNER: I don't know. It's hard to tell. I think this is a good result, but a terrible process. And again — again, I think as the world watched Congress step up to the edge of the abyss, it made them really wonder whether this place can work. But this is a good deal. It's a good agreement. It'll be good for the economy long term and it'll be good for the prospects of getting Congress to make the tough steps we need to make ahead.
GEORGE STEPHANOPOULOS: Good for the economy long term, but will it create jobs now? 25 million Americans are looking for work.
TIM GEITHNER: No, this agreement itself, on its own, doesn't create jobs. What it does is it avoids doing more damage in the short term, because the president refused to accept the types of deep spending cuts that many in congress wanted, and it — ocking in some long term savings it raises– it improves the odds over time. You're going to see this basic underlying growth we've see in the United States improve over time becuse people will be more confident we can live within our means.
GEORGE STEPHANOPOULOS: So when—
TIM GEITHNER: And again, it– George, with more confidence we can get our arms around this long term. We will have more room to do the things we need to strengthen investment jobs now.
GEORGE STEPHANOPOULOS: Well, how Mohamed El-Erian Chief Investment Officer of Pimco was on “This Week” yesterday, saying that this deal is going to make unemployment higher than it otherwise would be, growth lower than it otherwise would be. Is he just wrong?
TIM GEITHNER: I don't know that he looked at the details of the deal at that point, but I — I think when people have the chance to absorb this and look at it, and they look at the facts in the deal, I think they'll say you'll– they'll see what I said, George, which is this creates room for the private sector to continue to expand and by itself won't put the recovery at risk. But a lot of damage to confidence and how messy the process was getting here, and we (have) to figure out how to repair that.
GEORGE STEPHANOPOULOS: I'm just wondering. You're Treasury Secretary of the United States. What goes through your mind when you read that bulletin that says Apple Computer has more cash than the United States government?
TIM GEITHNER: Well, I don't think that's the right way to think of — again, there are resources in this country that —
GEORGE STEPHANOPOULOS: But it's true, isn't it?
TIM GEITHNER: No. Well, no, I don't — wouldn't look at it that way. We — our strength as a country is the basic strength of the economy long term. We're a very rich and strong country, a very resilient country long term. Ultimately, of course, what you need is Congress making sure that they can demonstrate, they can come together and solve some of the problems we face and that's what the president's working so hard to do.
GEORGE STEPHANOPOULOS: How — how do you avoid though– the lesson being drawn from this, that if you want to get your way in Washington hold the debt limit hostage?
TIM GEITHNER: I think they failed at that attempt. I think those who wanted to do that divided their party, scared the business community of the United States, scared the world, and they had to pull back from that because it was not acceptable, tenable, responsible way to try to govern. And I think one of the most important things—
GEORGE STEPHANOPOULOS: Well except the president didn't get the deal he wanted. He wanted a deficit reduction deal that included he called balance, that included revenue increases.
TIM GEITHNER: No, but– but that's what– that's what's going to come because the mechanism they agreed to will force that kind of balance that's inevitable. What the president prevented was those people using default as a threat over the American economy to get their agenda passed for the future. That is now off the table, definitively moved, and that's an enormously important accomplishment. We should never have been in that position, but that's a very important thing.
GEORGE STEPHANOPOULOS: How do you explain an economy where corporate profits are rising but jobs aren't being created?
TIM GEITHNER: I think it's an excellent, excellent question. You know, the economy as a whole, if you measure it by how much we're producing, we're almost back to the level before the crisis, despite how deep this crisis was. But job growth has been much slower, it's been much weaker.
It's probably because businesses put so much emphasis in improving productivity early– early in the recovery. And I think over time, though, you're going to see as we grow, you're going to see more job growth going forward. But again, that ultimately that depends on what Congress can do, what we in Washington can do to help confidence improve.
GEORGE STEPHANOPOULOS: A lot of economists Paul Krugman said yesterday that he thinks unemployment will be above eight percent by election date, November 2012.
TIM GEITHNER: Well, that's certainly possible, but it depends again on whether we can find a way in Washington to get these people, so divided, to come together and start to solve some problems.
GEORGE STEPHANOPOULOS: And what would you ask Congress to do right now to get the unemployment rate down?
TIM GEITHNER: Get this budget agreement in place behind us so we remove the threat of default in the economy. Pass these trade agreements to help expand exports. Find a way to help make sure we can expand investment infrastructure so more people particularly in construction get back to work, and find ways through tax reform we can strengthen —
GEORGE STEPHANOPOULOS: How can you strengthen investment when you’re calling for overall deficit reduction?
TIM GEITHNER: Well, you have to figure out a way to pay for it responsibly but there — we've got a long term tradition of making sure we finance infrastructure over time in a way that's deficit-neutral. We can do that. We can afford to do that.
GEORGE STEPHANOPOULOS: Finally, as you know there's lots of speculation about your future and you know this question– is coming. Earlier there'd been some reports that you would leave your post after a debt deal is reached. We're at that point.
TIM GEITHNER: Well, hold on. The vote hasn't happened– (laughs) the vote hasn't happened yet.
GEORGE STEPHANOPOULOS: So when it passes—
TIM GEITHNER: It's going to — it's going to happen.
GEORGE STEPHANOPOULOS: (It's) going to happen –
TIM GEITHNER: I've been a little busy. I haven't had a ton of time to think about that, but.
GEORGE STEPHANOPOULOS: But is it fair to assume that now that it's done you'll be leaving relatively soon?
TIM GEITHNER: I mean, I haven’t made that decision yet. And you know, we've got a lot of challenges, president's got a lot of challenges, and you know, I got other pressures on me, too. But I'll make that decision at the right moment.
GEORGE STEPHANOPOULOS: Mr. Secretary, thanks for your time today.
TIM GEITHNER: Good to see you. Thanks.
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This transcript has been edited for clarity.