Geithner on State of the Union: No deal ‘without rates going up’
In an interview airing today on CNN’s State of the Union with Candy Crowley, Treasury Secretary Timothy Geithner spoke about the fiscal cliff and the state of the U.S. economy. A full transcript of the interview after the jump. State of the Union with Candy Crowley airs Sundays at 9 a.m. ET/PT.
Full Transcript
THIS IS A RUSH FDCH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CANDY CROWLEY, HOST: Let me ask you, the reaction to your going up on the Hill and saying, hey, this is basically the White House position, has been Mitch McConnell saying, I — I think it was just demeaning for them to ask the Treasury secretary to come up here and give a proposal like this.
And by this, we have people saying it’s a sham, it’s, uh, you know, ridiculous. It’s a non-starter.
When you went up there, you didn’t think Republicans were going to go, good idea?
TIMOTHY GEITHNER, TREASURY SECRETARY: You know, what we’re trying to do is get these guys to come together, reach an agreement that’s good for the country and good for the economy.
CROWLEY: And by these guys, you mean you — you all…
GEITHNER: The Republicans…
CROWLEY: — and the Republicans.
GEITHNER: — and Democrats together.
CROWLEY: And the White House?
GEITHNER: That’s what we’re trying to do.
And what we did is put forward a very comprehensive, very carefully designed mix of savings and tax rates to help us put us back on a path to stabilizing our debt, fixing our debt and living within our means.
We’ve been very detailed about how to do that, both from the spending side and the revenue side. And we think this is a good plan for the country. And it — and it does the most important thing, Candy, which is that it gives 98 percent of Americans the certainty they) their taxes aren’t going to go up. And it gives us the chance to make sure we’re protecting Medicare for future generations and it gives us the ability to lock in a set of carefully designed reforms that put us back on a path to fiscal balance.
So it’s a it’s a very good plan and we think it’s a good basis for these conversations.
CROWLEY: It’s a — it’s a starting point because when you — when you look at it, the president said in September, I am so willing to deal with Republicans and it, you know, $2.50 worth of cuts for every dollar’s worth of revenue raising. And — and this, of course, is nowhere near that. You’ve got…
GEITHNER: Well, that…
CROWLEY: — $1.6…
GEITHNER: — no, that’s not true. No, that’s not what we’re — what were proposing is very consistent with that, which is we have, roughly, $2 of spending cuts, if you include what’s already been enacted, for every dollar of…
CROWLEY: Well except for, but does that count here?
I mean just…
GEITHNER: Of course it counts…
CROWLEY: — because you’ve already enacted it.
GEITHNER: No, of course it counts…
CROWLEY: This is now — that was your debt ceiling deal, correct?
GEITHNER: No, that was — again, let’s just go back. You know, we’ve been having this conversation with the Republicans for about 18 months. And from the beginning, what we all agreed is we need roughly $4 trillion in savings out over 10 years. And we’ve been doing that in stages. These are trillion dollars in spending cuts up front.
And we’ve proposed a balanced mix of other changes on the tax side and the spending side that go beyond that. And when you look at it together, it’s roughly two to one, spending cuts versus tax increases.
Now, we’ve been very detailed about what we can do on the spending side. We proposed $600 billion of cuts in health care programs, other mandatory programs, over 10 years.
Now, Republicans are — we don’t expect them to like all of those proposals. But all we can do is lay out what we believe in and then ask them to come back to us and tell us what they would prefer to do.
CROWLEY: One of the things that the Senate Republican leader, Mitch McConnell, said was, listen, if you take a higher premiums for the wealthy in Medicare, you increase the eligibility age in Medicare to eventually bring it to parity with Social Security, you should slow the cost of living in Social Security and other entitlement things, you know, we’re at the table, we’re dealing with revenue.
Is that good with you, those things?
GEITHNER: Well, you know, there’s a lot of ideas out there, a lot of ideas from Democrats, from Republicans.
CROWLEY: Right. But how about the specific one?
GEITHNER: Well, you know, again, there’s a lot of ideas out there. But I — I — what I can do today is explain to you what we think makes the most sense and what’s in my proposal today.
And, again, we’re prepared to listen to what Republicans suggest we do, but what we can’t do is react they until they’ve given us a proposal we can look at and see how it all fits together…
CROWLEY: Do they have your proposal?
GEITHNER: They do.
CROWLEY: Do — they do — they put it on a piece of paper?
We were told there wasn’t a — an actual plan, that you just sort of told them. So there’s an actual plan on a piece of paper…
GEITHNER: No, we…
CROWLEY: — saying, here it is?
GEITHNER: — we — again, we laid out a very comprehensive detailed framework of how we do it in what stages with $600 billion of spending cuts spread over 10 years in entitlement programs.
And, you know, I think right now, the best thing to do is for them to come to us and say, look, here’s what we think makes sense. We’ve told them what we think makes sense. What we can’t do is try to figure out what’s going to be good for them. They have to come tell us.
CROWLEY: Well, and — and by that, you mean in terms of cutting, because you know what they want in taxes. They don’t want to have, uh, tax rates go up on the wealthy. You know that they want to do something about entitlements. And the way this looks to them, if you — if you take the Republican side of this, having seen your plan today, the administration’s plan today, is they’re asked to do $1.6 trillion in revenue raising or tax increases, however you want to say it. And there is no certainty of any cuts here.
This sort of like, OK, here’s this $400 billion and, you know, it’s not guaranteed, but we’ll talk about it next year.
If you’re a Republican, you don’t — you just don’t take that deal…
GEITHNER: Well I can’t…
CROWLEY: — you have $50 billion in stimulus, so that’s more spending, not less. There’s just a lot of things in there — and not to mention, you all want to control the debt ceiling.
That’s just not — I mean you can understand how that’s a non-starter for them.
GEITHNER: No, it shouldn’t be. Again, let me — that’s not what we’re proposing.
Let me explain what we’re proposing. We’re proposing a balanced mix, detailed changes on tax policy, higher rates and limited deductions for the wealthiest Americans, alongside detailed, measurable, up front reforms on other government programs so that together…
CROWLEY: Such as?
GEITHNER: — and, again, in Medicare, in health programs and other mandatory programs. We just laid out $600 billion in detailed — I’ll give you a couple of examples, but you can look at the details out there.
We proposed to reform and limit farm subsidies, which can save a significant amount of money. And in health care, we proposed things like, for example, raising premiums modestly for higher income Medicare beneficiaries. We proposed to get the government much smarter in how it purchases medicine.
Those are just three examples. But there’s $600 billion of detailed policy in the — in that basic program, which, alongside the trillion we did together, that’s already in place, and the savings we get from winding down these wars, is a very substantial packet of reforms.
CROWLEY: But you’ve got a…
GEITHNER: Again, roughly…
CROWLEY: — $15 trillion debt and — and you did $1 trillion of it, and that was in order to get your debt ceiling raised. So…
GEITHNER: Well, but…
CROWLEY: — how does that count…
GEITHNER: Well, it counts because it reduces the deficit. What we’re here trying to do is to reduce the long-term deficit. So the tests we all…
CROWLEY: They new ones, as you know, the Republicans?
GEITHNER: Yes. And, again, and we’re prepared to do so with things on the spending side. But what we’re not going to do is to extend those tax cuts for the wealthiest Americans. Remember, those cost a trillion dollars over 10 years. And there is no possibility that we’re going to find a way to get our fiscal house in order without those tax rates going back up.
Now, again, alongside that, we’re preparing to do some very detailed things on the spending side, and we’re prepared to…
CROWLEY: But there’s no guarantee, right?
Didn’t that say that in that thing, that it — at least according to the readout we got of your plan. So you can feel free to correct me, because you haven’t given me a readout of it. It’s a…
GEITHNER: Guaranteed upfront measurable savings scored by CBO enacted into law. The only guarantee on this side, as you know, is when Congress enacts policies.
CROWLEY: Right. But you would be willing to go for specific things and guarantee that there will be…
GEITHNER: Of course.
CROWLEY: — a specific amount of cuts?
GEITHNER: Of course. Of course.
CROWLEY: But that’s next year.
GEITHNER: No.
CROWLEY: This year you want…
GEITHNER: That’s not true.
CROWLEY: — this — right now?
GEITHNER: That’s not true.
CROWLEY: Right now you would do it?
GEITHNER: We’re prepared to do, upfront, alongside a deal that includes raising rates on upper income Americans to the Clinton levels, we are prepared to do a meaningful amount of savings on the spending side, not just to avoid the damage of the sequester, but to help reduce our long-term deficits.
Now…
CROWLEY: But you want them — you want them to come forward with the cuts?
GEITHNER: No, I think, again, on…
CROWLEY: Specific cuts?
GEITHNER: — on — in general, we’ve laid out a detailed plan. We’d be happy to look at an alternative plan, but they have to lay that out for us, both on the revenue and rate side, but also on the spending side.
Again, that’s just the reasonable way. What we can’t do is sit here trying to figure out what works for them. They have to come tell us what works for them.
But — but, Candy let’s — let’s go to — let’s go to what’s at stake in this context. This is something we can do. And I think we’re going to get there, because there’s too much at stake not to get there, not just for the American economy, but for the world economy. And we have a chance to do something very good for the country now, very good for the country now, again, not just protecting 98 percent of Americans from seeing an increase in their taxes, not just preventing the threat of default hanging over the country in the future, not just preventing deeply damaging spending cuts upfront in this context, but doing something to help create room to invest in infrastructure, strengthen the economy, get more people back to work and putting our long-term fiscal house in order.
And that’s what we’re going to work toward.
Now, there’s no — no surprise, you’re — you’re a pro at this. There’s going to be a lot of political theater between now and when we get there.
CROWLEY: And is this a part of that political theater?
GEITHNER: This…
CROWLEY: — meaning your — you know, this is your opening gambit here. It’s not — you know you’re not going to get what you went up there and put out there for Republicans…
GEITHNER: No, we’re — what we’re trying to do — and this is — this is the only way I know how to do these things to solve problems, is you have to be very clear and direct with people about what you want and what you need and what’s important for the country. And that — and that’s what we did.
And in the — in those proposals, no surprise. Those are the things the president campaigned on. The country has had a chance to think about the merits of those proposals. They’re overwhelmingly supported by the American people and the business community.
And that’s why we think that, ultimately, they’re going to be the basis for an agreement.
CROWLEY: So, the — the $50 billion in stimulus, let’s take that that’s — that’s in there, for roads and infrastructure, etc.
If you don’t get that, then no deal?
GEITHNER: Again, huge support in the business community for that.
CROWLEY: OK,
GEITHNER: Huge support.
CROWLEY: — but if you don’t get that…
GEITHNER: — and it’s good for the economy, because, again, it makes the businesses more competitive and gets more Americans back to work. It’s something we can afford.
And those proposals we made to strengthen growth are things we paid for in this plan. We show how to pay for it, how to make sure that we’re using the savings from the wars, for example, to invest in things that are important to America.
And, again, what we’re asking people to do is to make a modest investment in making this country stronger.
CROWLEY: Right. And — but again, you — you know where — where this is going. John — John Boehner, again, the speaker — said that we’re at a stalemate.
Is that how you would describe where things are?
GEITHNER: No, I — I think we’re far apart still, but I think we’re moving closer together. Again, remember…
CROWLEY: Where are you closer?
GEITHNER: Well, they — the Republicans have said for the first time in decades, if I’m not mistaken, the leaders of the Republican Party, that they are prepared to raise…
CROWLEY: — on the revenue side…
GEITHNER: — taxes as part of a deal that helps reduce our long-term deficits.
Now, what they haven’t said to us is how far they’re willing to go both on rates and revenues. And that’s something we’re going to need to see from them if we’re going to have an agreement.
CROWLEY: And they said no increase in rates. They’ve said that repeatedly.
GEITHNER: Yes, but this is going to be — but they know this. I mean, Candy, there — there’s not going to be an agreement without rates going up. There’s not going to be…
CROWLEY: So you’ll go off the fiscal cliff if it will — if the Republicans say, sorry, no way are we going to raise rates for the — on the wealthy. You guys are willing…
GEITHNER: If we’re…
CROWLEY: — to go off the fiscal cliff?
GEITHNER: …if Republicans are not willing to let rates go back up — and we think they should go back to the Clinton levels, a time when the American economy was doing exceptionally well — then there will not be an agreement.
CROWLEY: And you’d be willing to let that happen?
GEITHNER: And, again, let me explain why. If — again, if — if — if they are going to force higher rates on virtually all Americans because they’re unwilling to let tax rates go up on 2 percent of Americans, then, I mean that’s the choice they’re going to have to make.
But they’ll own the responsibility for the damage…
CROWLEY: But it’s kind of a choice that the country will have to pay for, correct?
GEITHNER: — to the American economy then.
CROWLEY: So is there some responsibility for you all?
Like you wouldn’t let that happen and say, OK, fine, you guys don’t want to do tax rates, we’re out of this?
GEITHNER: Again, what we’re trying to do is to get them to come together and join us in doing something that’s good for the American economy. And we recognize that it’s going to require spending, savings and not just revenue increases on the top wealthiest 2 percent of Americans.
CROWLEY: And you would like them to — to propose the spending — on the spending side?
GEITHNER: Well, again…
CROWLEY: You’d like to see what they want?
GEITHNER: No, we’ve proposed detailed proposals on both sides. If they want to go beyond that, then they should tell us what they’d like to do. If they want to do it differently, they should tell us what they want to do.
CROWLEY: Whose turn is it?
Where are we in this?
GEITHNER: The — the ball really is with them now. And, again, they — they’re in a hard place. And they’re having a tough time trying to figure out what they can do, what they can get support from their members for. That’s understandable. This is very difficult for them.
And we might need to give them a little more time to figure out where they go next.
But…
CROWLEY: You don’t have a lot of time.
GEITHNER: We don’t have a lot of time. I agree with you. We can’t wait very long. And what we’re trying to do is be as clear as we can with what is essential to us and what we’d like to have, what we think is good for the American economy.
And what we need to hear from them now is what do they think makes sense.
CROWLEY: In terms of cuts, because you know what they think makes sense in terms of revenues.
GEITHNER: No, they haven’t told us — they haven’t told us yet what (INAUDIBLE) on revenues or on rates or even on deduction limitations. There’s been nothing from them on that, except for a vague recognition, which we welcome, that rates are going to have — that revenues are going to have to go up.
That’s — that’s part of it, but that’s just the…
CROWLEY: I mean they’ve been pretty adamant on no — no rate hikes.
But we’ve — I mean, my final question, because you’re — you’re going to leave us at some point, I guess, after this — you get this fiscal cliff thing cleared up in some way, shape or form.
When you look back over your four years here as the Treasury secretary, when you look back at the stimulus plan of $7 trillion plus, and where we are right now in the economy, the economic recovery, was this honestly where you thought you would be when you started out trying to fix the economy you got?
GEITHNER: I think we’re in a much stronger position today, as a country, then we were in ’07 and ’08, when the president came into office.
CROWLEY: Sure, folks said that for sure.
GEITHNER: A much stronger position.
CROWLEY: I just wonder if you think in looking forward, that this was where you thought we’d be?
GEITHNER: And — and…
CROWLEY: Did you think we’d be better off at this point?
GEITHNER: — and, to me, uh, I think we’re in a much better position than, actually, I thought was realistic, in those darkest days of this financial crisis, when there was a real risk of catastrophic collapse.
And I think all Americans should be much more confident today than at any time in the last four or five, six years, that we have a better foundation for broad-based growth than we had in that.
And I’m very — I’m very proud of being part of that, even with all the challenges we have ahead.
CROWLEY: Mr. Secretary, thank you for joining us.
GEITHNER: Thank you.
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