Transcript: Treasury Secretary Timothy Geithner and Alan Greenspan

Aug 2, 2009 — -- ABC NEWS, THIS WEEK WITH GEORGE STEPHANOPOULOS INTERVIEWS WITH SECRETARY OF THE TREASURY TIMOTHY GEITHNER AND FORMER FEDERAL RESERVE CHIEF ALAN GREENSPAN

STEPHANOPOULOS: A lot of good news out there this week, but the bad news is, the consumers are still real scared. Even though their income went up, the spending went way down. What more can the administration do, if anything, to encourage the spending to go back up?

GEITHNER: George, you are right that there are signs the recession is easing. And if you think about where we were at the end of last year -- we had an economy in freefall, a financial system on the verge of collapse. And the actions that this administration has taken have been very effective in helping stabilize conditions, help repair the financial system, bring down the costs of credit...

STEPHANOPOULOS: We've (inaudible) a bottom?

GEITHNER: But I think we have a ways to go. I want to emphasize the basic realities. Unemployment is still very high in this country. We need to make Americans more confident about their future...

STEPHANOPOULOS: How do you do that, though?

GEITHNER: And I think -- I think you need to do it through just by making sure people understand we are going to do what's necessary to bring growth back on track. We're going to stick with this until Americans are more confident in their future, businesses have access to credit, families are going to be able to put their kids through college. That's going to be the ultimate test of our (inaudible). And the policies the administration put in place working with the Congress were designed to provide very substantial support to make sure we get through this.

STEPHANOPOULOS: You mentioned the big problem of unemployment, and we're still nowhere near the kind of growth that it would take to create jobs. More than 2.5 percent growth to start to create jobs.

I know the administration has thought that's not going to come until next year, but some private economists now say it could happen in the second or third quarter of this year. They look at these numbers and see that. Do you have any reason to believe they're right?

GEITHNER: Well, I think you're right to say that the broad consensus of private forecasters is you're going to see positive growth in the second half of this year, and expect that to continue.

STEPHANOPOULOS: A growth at the 2.5 percent level?

GEITHNER: Not clear yet, but you need growth before you get people -- businesses to start creating jobs again, and that's what we're going to be very focused on doing.

STEPHANOPOULOS: So should Americans expect that more jobs are going to start getting created this year, or not?

GEITHNER: I think you're going to see -- what you're going to see first is growth turn positive. And then you're going to see the pace of job losses slow materially for the -- they have already slowed significantly, as you said. They're going to slow materially further.

But again, most private forecasters -- and let's use their judgment -- suggest you're going to see unemployment start to come down maybe beginning in the second half of next year.

STEPHANOPOULOS: And what about the flip side? What are the chances that we're actually going to see a second dip later this year?

GEITHNER: I think that's something we're very focused on. Again, we need recovery to be built on private demand, private spending, businesses taking a chance again in the American economy, putting investments to work, starting to rebuild their employment base. That's the ultimate test for recovery. And the very important thing for us is to make sure we're sticking with this until we're very confident we have a strong, private sector-led recovery in place.

STEPHANOPOULOS: And what are you looking at that would give you some cause of concern that we could slip back?

GEITHNER: Well, I don't think you can make that -- see that risk now. Again, and the stimulus program and what we've done in the financial sector are designed to have a sustained impact, again, because the damage we had done to our economy was so great, it was just going to take a long, sustained effort.

STEPHANOPOULOS: And that means unemployment, as you said, pretty high, at least through the rest of this year. At the same time we're seeing reports said up to 1.5 million people could be losing their unemployment benefits by the end of this year.

Does that mean that the administration is going to have to look at extending unemployment benefits again?

GEITHNER: I think that's something the administration and Congress are going to look very carefully at as we get closer to the end of this year. And that's going to be one important thing to look at.

STEPHANOPOULOS: We already know that a million-and-a-half people are going to lose their benefits, don't we?

GEITHNER: Yes. Again, I think the most important thing we need to make sure people understand is working with the Congress, we're going to make sure we do enough to bring this economy back.

But, you know, our job is not just to repair the damage done to this economy, bring growth back, we need to make sure that we're making the kind of investments that are going to build a more productive economy, gains of growth more broadly shared.

And that's why it's so important, as we focus on recovery, we're making investments in health care reform, in education, in infrastructure, fixing our financial system, the kind of things we're working on right now.

STEPHANOPOULOS: I did want to get to that. And as we pull out of the recession, the other big worry going forward is deficits. You heard that from the Chinese this week. Our next guest, Alan Greenspan, has warned this as well.

And Senator Charles Grassley, the Republican ranking member of the Senate Finance Committee has cited CBO estimates, Congressional Budget Office estimates, that your budget will add $9 trillion to the national debt over the next decade.

(BEGIN VIDEO CLIP)

SEN. CHARLES GRASSLEY (R-IA), RANKING MEMBER, FINANCE COMMITTEE: Our debt, as a percentage of the economy, will grow in excess of 80 percent, a level also that has not been seen since this country was in World War II.

(END VIDEO CLIP)

STEPHANOPOULOS: That is a very, very high level. And I know you believe that passing health care is essential to getting the deficit under control, but independent analysts also say that even with that, you're going to have to find new government revenues.

The former deputy treasury secretary, Roger Altman, said: "It is no longer a matter of whether tax revenues must increase, but how." Is he right?

GEITHNER: George it is absolutely right and very important for everyone to understand that we will not get this economy back on track, recovery will be not strong and sustained, unless we are -- can convince the American people that we're going to have the will to bring these deficits down once recovery is firmly established.