Tim Geithner on 'This Week'

Treasury Secretary Timothy Geithner on the fiscal cliff stalemate.
12:38 | 12/02/12

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Transcript for Tim Geithner on 'This Week'
Good morning and welcome to "this week." Compromise or combat? Stalemate. Let's not kid ourselves. Creeping up on that fiscal cliff. This is not a game. That offer yesterday was simply not serious. As private talks seem to collapse, president obama cranks up the public heat. If congress does nothing, you'll see your taxes go up on JANUARY 1st, THAT'S A SCROOGE Christmas. Which side will blink? Or will it cripple the economy? We'll ask our headliners the president's pointman, treasury secretary tim geithner. Plus, susan rice hits a senate buzzsaw. The concerns I have are greater today than they were before. Susan rice is extraordinary. Does president obama want to fight over his secretary of state? And did obama and romney really bury the hatchet at that oval office lunch? Our roundtable with tom cole and keith ellison for the democrats. Former romney adviser dan senor. Steve rattner and abc's own cokie roberts. Hello, again, washington back to work this week, but with just 30 days to go until america hits the fiscal cliff, it could mean a tax increase for everyone, there is no sign that congress is anywhere close to a deal. Let's begin with treasury secretary tim geithner, thank you for joining us, mr. Secretary. The meetings on this capitol hill did not go very well. SENATOR mitch McConnell told the weekly standard that he burst into laughter when he heard your proposal and we just heard speaker of the house john boehner said, let's not kid ourselves there's a stalemate. I think we're going to get there. I mean, just inevitably a little bit of political theater. Sometimes that's a sign of progress. I think we're making some progress, but we're still some distance apart. What's at stake here is very important. We're trying not just to prevent a tax increase on 98% of americans, we're trying to go beyond that's going to be good for the long term american economy. But you said you're getting closer, they're saying you're getting much farther apart. They say that this is not a serious proposal. We have a very good plan. We have a very good mix of tax reforms that raise a modest amount of revenues on the wealthy 2% of americans. Combined with very comprehensive, very detailed savings that get us back to the point where the debt is stable and favorable. If we can do that carefully, we can invest in things to make america stronger. We can rebuild infrastructure. We think those are good investments in america and we think we can afford them. Let's look at an outline of what republicans said they heard in the meeting. 1.6 trillion in tax increases over the next ten years. 50 billion in stimulus spending right now. 400 billion in unspecified medicare cuts. Over the next ten years. And then, permanent authority to increase the debt limit the president wants that authority. They look at that 1.6 trillion in revenue and say it's twice as much you get from raising taxes on the wealthy and much more than democrats would ever accept in the senate. That's why they say this is not serious. But let me start with what you said, we're making the threat of default. We propose to take an idea that senator McConnell proposed in the summer of 2011 and extend that. What that does, it lifts the cloud of default over the economy. The president has increased the debt limit. Congress has a chance to express approval of that. It's a very smart way by the senator with impeccable credentials to lift this threat. You said that he never intended it to be permanent? But, again, it was a good idea then, it's a good idea going forward. It came from him. It wasn't our idea. That makes a lot of sense. What you said that wasn't quite right, what we laid out for them was, a detailed set of reforms in health programs, government programs over ten years, which are going to be tough, but we think they make sense. They don't like all those changes, they might want to go beyond that. But they have to tell us what those things are. You're right on the revenue side. We're proposing to let the rates go back to clinton levels. That would be a good thing to do as a sensible economic policy, and we want to combine that with tax reforms that will limit deductions. There's no surprise in this. We have been proposing this for a very long time. The president campaigned on it and I think that's where we're going to end up. And I think that's there going to be very broad support from the business community and from the american people for an agreement with roughly that shape. When you talked about have been proposals from governor romney during the presidential campaign, and from other republicans, when you talk about those limitations on deductions, do you include the charitable deduction and the home mortgage deduction? I think you're right to point out the essential problem in this, which is, if you try to limit deductions with a $25,000 cap, what you do is you end up hitting millions and millions -- actually 17 million americans -- a huge part of the revenue comes from that basic fact, which we're not prepared to do -- it completely eliminates the incentives for wealthy americans to give to charities and if you protect the charitable contributions you reduce. So, those proposals, they may be worth considering, but if you design them carefully, they don't raise revenue you need to get us back to a fiscally responsible position. Are you saying that the charitable deductions should be off the table? We propose a percentage limit on the value of all of the deductions and inclusions for 2% of americans. What that does is, it preserves a very significant economic incentive for americans to give to charities. Of course, that's very important for all universities across americans and all hospitals and millions and millions nonprofit entities across the country. We think that's a better way to do it. That slightly reduces the marginable benefit of the deductions. One of the things that the republicans want to know is, if the president is still behind the idea, for example, gradually raising the eligibility age for medicare, this adjustment in social security payments and so-called change that would adjust the cost of living adjustments, is the president still behind those ideas? There are other things that we can do to strengthen medicare and strengthen social security. What I can do is to tell you the merit of the specific things we proposed. Which, again, are very substantial savings over ten years. And when republicans come to us and say, we would like to do something different or beyond that, and if it meets our basic values and our test we'll give it serious consideration. You're willing to consider new restrictions on social security -- no, I didn't say that. Let me clarify. Thank you for asking. What the president is willing to do is to work with democrats and republicans to strengthen social security for future generations. So americans can approach retirement with dignity and the confidence they can retire with a modest guaranteed benefit. But we think you have to do that in a separate process so that our seniors don't face the concern that we're somehow going to find savings in social security benefits to help reduce the other deficits. To be clear that's one thing that's clearly off the table. Social security is off the tables in these negotiations. In a separate process to strengthen social security not as a process to reduce the deficit. On the issues of taxes, is there any flexibility on the president's position? Does it have to go all the way back to the tax rates on the wealthy to the clinton levels? Again, george, we think the best way to do this is to have those tax rates go back to where and one of the best, at one of the most prosperous times in recent american history to combine that reforms that limit reductions for 2%, I'm deeply skeptical about ways to get through this without that mix of rates and reforms. And if congress doesn't agree, you're comfortable going over THAT CLIFF ON JANUARY 1st? There's no reason why 98% of americans have to see their taxes go up because some members of congress on the republican side want to block tax rate increase for 2% of the wealthy americans. Remember, those tax cuts cost a trillion dollars over ten years. There is no responsible way we can govern this country at a time of enormous threat, risk, challenge, uncertainty, millions of americans retire, huge levels of poverty, with those low rates in place for future generations, those rates will have to go up. That's an essential part. Lot of democrats think if the republicans do indeed dig in on those tax rates, it's far preferable to go over the cliff than to reach a different kind of deal? Do you agree? I don't think that's going to happen. It certainly doesn't need to happen. We'll work hard to make sure it doesn't happen. We'll try to do something good for the long-term. What would happen to the economy if we do go over the cliff? It would be very damaging to average americans. There's no doubt about it. But there's no reason why it has to happen. We're going to work hard to prevent it. The only reason that would happen if a small group of congress they'll block an agreement because they're not prepare to see tax rates raise modestly for just 2% of americans. I hear you speak they're going to work hard. But republicans saying you're going backwards not forward. What is the specific next step to get this back on track? Is the president ready to meet face to face with the speaker, face to face with the republican leader in the senate to try to nail this down? Of course he is. We'll do that when it makes sense. At this point, though, you got to recognize that they're in a very difficult place. And they recognize they'll have to move in a bunch of things, yet. So, what we're going to do is to continue look for ways to solve this problem. But, ultimately, they have to come to us and tell us what they need. What we can't do is to keep guessing about what -- the ball is in their court? Absolutely. Absolutely. They understand that. When they come back to us and say, we would like you to consider this and that, we'll take a look at that. One final question, this is your last assignment for the president, wrapping up these negotiations, so, how much longer you're going to be staying? Interesting to see this week, warren buffett thinks your best replacement would be the head of hp, jamie dimon. I think he, if we did run blems in markets I think he would be the best person we could have. Any chance of that? George, the president is going to choose somebody very talented to lead the treasury for his next four years. I'm very fortunate, I have been able to work with him to help solve these problems for the country over this period of time and I'm very confident he's going to have somebody in place in january to succeed me. I didn't think you were going to bite on that. Thanks for your time this morning. Mr. Secretary, thank you. Thanks, george. Our powerhouse roundtable is

This transcript has been automatically generated and may not be 100% accurate.

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