Treasury Secretary Tim Geithner today attempted to sell aspects of President Obama’s jobs proposal to some skeptical senators on Capitol Hill who have a basic disagreement on the best way to grow the economy and create jobs, while the president continues his bus tour through the mid-Atlantic to promote components of the rejected American Jobs Act.
With provisions such as the payroll tax holiday set to expire at the end of the year, Geithner told senators that despite the potential for successful reforms from the Joint Committee on Deficit Reduction, the administration is “not going to do fundamental tax reform in two months.”
“As we start to lay the foundation for a broader political consensus on comprehensive tax reform that lowers the corporate rate, broadens the base, makes investment in the United States more competitive, we need to be doing some things now to help get the economy growing more rapidly,” Geithner testified before the Senate Committee on Small Business and Entrepreneurship.
Geithner said that the administration believes that short-term tax incentives, such as zero capital gains for investments in small businesses and making expensing more generous for small businesses, would help spur economic growth now.
“This is the broadest, most sweeping and I think most creative mix of tax incentives the Congress has ever considered I think for small businesses in a very short period of time,” Geithner said. “We should think about it as a bridge to fundamental long-term tax reform, not as a substitute for it.”
Sen. Olympia Snowe of Maine, the top Republican on the committee, urged the secretary to look beyond temporary tax provisions to find long-term solutions to the nation’s unemployment crisis, such as sweeping tax and regulatory overhaul.
“Rome is burning and we’re facing the decimation of our communities, and they want help,” Snowe told Geithner. “If you’re talking about policies in 2014, 2015, 2016, we’ve had three years of virtually the same unemployment numbers as we do today, Mr. Secretary. That’s the point. This is nothing new and we need to get ahead of the curve at some point and make long-term, fundamental, predictable changes in our tax and regulatory policies. I’m hearing it from everybody.
“Seventy-four percent of the American people say we’re moving in the wrong direction. What is it you’re not hearing? I would love to take you on a street tour,” she added. “I don’t know who you’re talking to. I don’t know who the president is talking to. But you need to talk to the average person, unfettered, unfiltered. Go down to Main Streets.”
Sen. Scott Brown also blamed the anemic economic recovery on the uncertainty and instability facing small businesses and he said that 488 regulations deemed significant by the Obama administration and costing a total of $80.7 billion are “the wet blanket over their efforts to create jobs.”
“Demand is a problem but it’s the lack of regulatory and tax certainty for every business in Massachusetts,” Brown, R-Mass., said. “[Businesses] don’t know what’s next and they’re very scared.
“As a result, the banks don’t want to go in and take advantage of these programs because of the overregulation. The people who are borrowing don’t want to go borrow because of the strings attached to it,” Brown added. “There’s a complete disconnect really between … getting the money out of the door in a quick and effective, timely manner.”
Geithner admitted that “the economy is much weaker than any of us would like” and attributed the slow recovery to a host of elements, including a shock to oil prices, a natural disaster in Japan, a crisis in Europe and a U.S. economy “still healing from a long period where we took on too much debt, we built too many homes, and there was too much risk taking leverage in financial sector.
“The question is what can we do about it,” Geithner said. “What can you join us in supporting because those things alone, tax reform, and even where we can agree on regulatory reform, they’re not going to get the economy growing fast enough given the pressures we face globally and yet our headwinds we have coming our way, digging our way out of this crisis.”
The secretary said he and the president are focused on “long-term infrastructure investments to help rebuild the economy” and “temporary tax measures [that] can be powerful in a recession.”
“Things to help make sure that going ahead, through the end of this year, and for an additional 15 months or so, the average American has a lower tax burden than they do today, and the average business has a lower tax burden than today,” he said. “Without Congress acting on that front, then the economy will be weaker.”
Sen. Maria Cantwell, D-Washington, asked Geithner for his view of the Occupy Wall Street movement, which Geithner attributed to “very high unemployment, huge increase in inequality, alarming rise in poverty, a deep sense of economic insecurity, [and] loss of confidence in faith of public institutions.”
“There is a huge amount of frustration and concern about challenges we face, and that’s why we’re trying to work so hard with the Congress to get more things in place to make the economy stronger, and put in place stronger protections over the financial system, heal the damage caused by this crisis,” Geithner said. “By any measure, we have a lot more work to do.”