Transcript: Treasury Secretary Timothy Geithner

"This Week" Transcript with Treasury Secretary Tim Geither

Aug 2, 2009 —


STEPHANOPOULOS: Tim Geithner, 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 way up, their spending went way down. What more can the Administration do if anything to encourage spending to go back up?

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

STEPHANOPOULOS: Have you created a bottom?

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

STEPHANOPOULOS: How do you do that though?

GEITHNER: I think you need to do it through by just making people understand we're going to do what's necessary to get growth back on track. We're going to stick with this until Americans are more confident about their future. Businesses have access to credit. Families are going to put their kids through college. That's going to be the ultimate test and the policies the Administration put in place working with "Congress were designed to provide very substantial support to make sure we get through this.

STEPHANOPOULOS: You mention the big problem of unemployment, and we're still nowhere near the kind of growth it would take to create jobs. More than 2 and half percent growth to start to create jobs. I know the Administration has that 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: I think you're right to say the broad consensus of private forecasters is that you are going to see positive growth in the second half of this year and expect that to continue.

STEPHANOPOULOS: Above that two and a half percent level?

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

STEPHANOPOULOS: Should Americans expect that more jobs are going to be created this year or not?

GEITHNER: What I think you are going to see first is growth turn positive. And then you are going to see the pace of job losses slow materially, they've already slowed significantly as you've said. They're going to slow materially further. Again most private forecasters, 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 we're going to see a second dip later this year?

GEITHNER: 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 on the American economy. Putting investments to work. Starting to rebuild their employment base. That's the ultimate test for recovery. And a 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 for concern that we could slip back.

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

STEPHANOPOULOS: And that means unemployment will remain high for the rest of this year. At the same time we're seeing reports that up to 1 and a half 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 is something that 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 half people are going to lose their benefits don't we?

GEITHNER: Again the most important thing we need people to 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 are making the kind of investments that will build a more productive economy, gains of growth more broadly shared. And that's why it's so important as we focus on recovery that 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 do want to 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. You hear that this week and our next guest Alan Greenspan has warned of this as well, and Senator Charles Grassley, the Republican ranking member of the Finance Committee cited CBO estimates, Congressional Budget Office estimates, that your budget will add 9 trillion dollars to the national debt over the next decade.

SEN. CHUCK GRASSLEY: Our debt as a percentage of the economy will grow in excess of 80% a level that also has not been seen since this country was in World War II.

STEPHANOPOULOS: That is a very high level and I know you believe that passing health care is central for getting the deficit under control but independent analysts say even with that you are going to need to find new government revenues. The former deputy Treasury Secretary Roger Altman said it is no longer a matter of whether tax revenues should increase but how. Is he right?

GEITHNER: George it is absolutely right and very important for everyone to understand we will not get this economy back on track, recovery will not be strong enough to sustain unless we can convince the American people that we're going to have the will to bring these deficits down once recovery is firmly established. Remember we inherited a 1 point three trillion dollar deficit. The cumulative consequences of the policies this country pursued over the last 8 years left us with 6 million dollars of more debt than we would have had by making a bunch of commitments to cut taxes and add to spending without paying for those. We are not going to be able to afford to do that. And it is very important that people understand that. Our first priority now though is to get this economy back on track, make sure this financial system is repaired. Without that, we're not going to get our deficits under control and the necessary path to fiscal responsibility, the necessary path to getting this country living within our means again is not just health care reform, to bring down those costs, but we're going to a range of other things and that's going to be a very difficult challenge for this country. We can do this, it just requires the will to act.

STEPHANOPOULOS: Including new revenues?

GEITHNER: Well, we're going to have to look at – we're going to have to do what's necessary. Remember the critical thing is people understand that when we have recovery established, led by the private sector, then we have to bring these deficits down very dramatically. We have to bring them down to a level where the amount we're borrowing from the world is stable at a reasonable level. And that's going to require some very hard choices. And we're going to have to do that in a way that does not add unfairly to the burdens that the average American already faces.

STEPHANOPOULOS: But that's the dilemma, isn't it?

GEITHNER: That is the dilemma.

STEPHANOPOULOS: Because when you look at health care reform again – I know you believe it's going to bend the cost curve over time. But the Congressional Budget office says, at best, the health care reform plans out there are going to be deficit-neutral over the next ten years. So to bring the deficits down, there is not enough money in the discretionary budget, we all know that. That means more revenues. The President has said that taxes won't go up for any Americans earning under $250,000, but it doesn't appear that he's going to be able to keep that promise if you're going to bring the deficits down.

GEITHNER: George, we can't make these judgments yet about what exactly it's going to take and we're going to get there. But the very important thing, and no one is going to care about this more than the President of the United States, is for people to understand that we do not have a choice as a country, that if we want an economy that is going to grow in the future, people have to understand that we have to bring those deficits down. And it's gonna, it's going to difficult - hard for us to do and the path to that is through health care reform. But that's necessary but not sufficient. We [are] going to do some other things too.

STEPHANOPOULOS: So revenues are on the table, as well?

GEITHNER: Again, we're not at the point yet where we're going to make a judgment about what it's going to take. But the important thing…

STEPHANOPOULOS: But you're not ruling it out, you can't rule it out.

GEITHNER: I think what the country needs to do is understand we're going to have to do what it takes, we're going to do what's necessary.

STEPHANOPOULOS: Let me ask you about health care. The negotiations seem to stall out in the Senate, they are going to try to come back by Sept 15th. The House committees have all passed the bill. One of the things that, Senator Grassley, we just saw, is asking about is that he says he wants some assurance, some guarantees really, that whatever deal, if they strike a deal, a bipartisan deal in the Senate finance committee it's going to hold all the way through the process. The Senate floor, the House floor, the conference committee, can the administration give him that assurance?

GEITHNER: I think that is what every legislator wants. They want that to be of confidence.

STEPHANOPOULOS: They are not going to get it through?

GEITHNER: You know, (chuckles), we want to have an outcome that meets these core principles the President laid out. Which is we want to make sure that we're doing something that is going to reduce the growth in cost over the long term, expand access, improve the quality of care. Do that in a fiscally responsible way that does not increase, increase unduly the burden on average Americans today. That's the basic test. And we're going to try to make sure that we achieve that with the broadest consensus as possible.

STEPHANOPOULOS: You want broad consensus but senator Grassley, his colleague senator Enzi are saying that they need those assurances, that can't get them?

GEITHNER: Well again, you know (laughs) we want to make sure we get this done. And we're gonna- as the President's said, we're going to look at anything reasonable, consistent with those principles that's going to get this done.

STEPHANOPOULOS: You want it to be through consensus, the President has said he wants a bipartisan bill if possible, but do you believe it is possible if necessary to get meaningful health care reform with democrats only?

GEITHNER: George, I think that again this is a big consequential reform of the country. And as many people observes, ideally you want to do this with as broad a base of consensus as possible. But people on the hill are going to have to make that choice, do they want to help shape this and be part of it. Or do they want this country, the United States of America, to go another several decades without doing whatever other serious country has done, which is to give their citizens access to basic quality of care.

STEPHANOPOULOS: But if Republicans can't come to an agreement with the democrats are the democrats and the White House willing to go it to alone?

GEITHNER: George, again, we're going to try and get this done on the best possible terms consistent with those principles. Can't tell you what it's going to take. But you see what the President is trying to do.

STEPHANOPOULOS: Let me ask you about the TARP. Um the Tarp inspector general Neil Barovsky has criticized your department for not being transparent and he's also said that the tax payers could be on the hook for up to $23 trillion dollars in liabilities. I know you dispute that figure but what can you tell us about where the TARP stands right now. And how much of the $700 billion that has been appropriated taxpayers can expect to get back?

GEITHNER: Let me just emphasize what's important so that to Mr. Barvosky and to the other oversight panels and to the President and to the Secretary of the Treasury. We want to make sure we have the highest level of transparency on these programs. And we are doing everything we need to make sure that they are delivering the benefits they need with as little as risk of fraud as possible. And he has made a number of reforms we've adopted, very helpful role in shaping these programs and we are committed to do everything necessary to achieve that.

Now that program itself, we're in a much better position than I thought we would be. Frankly if you just look back, 4 months ago, 3 months ago, or 6 months ago. The financial system today is more stable, the cost of credit is more available, the cost of credit is down significantly. Broad concern about collapse of the financial system is receded dramatically. And that is very, very important to the prospects of recovery.

STEPHANOPOULOS: We're not going to see a collapse, are we?

GEITHNER: No not at all. That's not going to happen. It's absolutely preventable and again there is much more confidence today than we've seen in the last, I think, even in a year, in the basic stability of the us financial system and that is a very, very important accomplishment. And we have done that, I was here 3 or 4 months ago, we had roughly $40 billon left in authority in TARP. Today we have roughly $130 and partly because we have been very successful in having private capital come back into this financial system and we've had more than $70 billion come back into the government and that money goes directly to reduce our debt.

STEPHANOPOULOS: How much more are you expecting to be paid back?

GEITHNER: Can't tell, but substantial additional sums will come back and we- we're getting, we've already earned about $6 billion for the tax payer on those investments. And you now this program is delivering very important improvements in availability of credit which is the ultimate test.

STEPHANOPOULOS: So it's going in the right direction, it's going up. Can you say now with certainty that you're not going to have to come back to the congress for more money?

GEITHNER: We do not plan to ask for more money and I think it's quite unlikely that we do. But the important thing, George, is what you just said. People need to understand that we will do what is necessary to make sure that viable businesses, families that have been very conservative and prudent have access to credit at reasonable terms. That's the basic purpose of these programs and we're going to do what's necessary to achieve that.

STEPHANOPOULOS: The issue of executive compensation for those banks, a lot of them are trying to get out from under the TARP restriction because they want to get out of the compensation restrictions. The House passed a bill on Friday to give share holders more rights uh to vote on executive compensation. Also the SCC more power. Republicans in the House were very critical.

REP. SPENCER BACHUS: "This bill continues the democratic majority tendency to go to the default solution for every problem – create a government bureaucracy to make decisions better left to private citizens."

STEPHANOPOULOS: Is the government getting to involved?

GEITHNER: Absolutely not, and I think that really everybody understands that we cannot have our financial system go back to the practices that brought this economy to the brink of collapse.

STEPHANOPOULOS: Do you think that is happening?

GEITHNER: No, I don't think we're at the point yet but it's going to take fundamental reform of our financial system, compensation reforms are an important part of that. But we need to go beyond that and that is why the President has moved so early in this administration to propose very far reaching reforms to provide much stronger protection for consumers and deliver a more stable financial system and give us better tools to manage financial crisis. The broader fundamental reforms to protect consumers, create a more stable systems are absolutely important. One of the President's top legislative priorities this year and I think ultimately you're going to find broad based support for those reforms.

STEPHANOPOULOS: Mr. Secretary, thanks very much for your time today.

GEITHNER: Good to see you.