Video: Tim Geithner On Meet The Press With David Gregory, November 1, 2009
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GREGORY: Let me talk about the deficit and the debt. These are alarming numbers, you said they are. Let's look at the deficit since Inauguration Day: $1.2 trillion, now $1.4 trillion; it's up 17 percent. The overall debt, Inauguration Day: $10.6 trillion; now $11.9 trillion.
What's it going to be a year from now?
GEITHNER: Well, it's going to have to come down. Now it's too high, and I think everybody understands this. You know, we've got these two central imperatives: restore growth, create jobs. But make sure people understand we're going to have to bring those fiscal deficits down as growth recovers; first growth, though. Without growth, you can't fix those long-term fiscal problems.
But you're not going to have a recovery that's going to be strong enough unless people are confident we're going to have the will to go back to live within our means.
GREGORY: How do you bring it down, though? Do taxes have to go up?
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GEITHNER: Well, we're going to have to do -- we're going to have to make some hard choices. The -- but we're not really at the point yet, David, we're going to know what's going to be the best path forward. The president's very committed to bring down these deficits, and he's very committed to doing so in a way that's not going to add to the burden on people, people making less than $250,000 a year.
GREGORY: But wait a minute, though, what are hard -- I mean, I think a lot of people, it's fair to say, what are hard choices?
I mean, what hard choices have been made so far? Are you going to raise taxes?
GEITHNER: We're going to have to bring our resources and our expenditures more into balance.
GREGORY: So it's possible.
GEITHNER: Well, again, the president's committed to make sure we get this economy back on track. We're bringing down this deficit over time. And to do so...
GREGORY: Mr. Secretary, you talked about hard choices, so why can't you give a straight answer to whether taxes have to come up...
GEITHNER: Because...
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GREGORY: ... when you have a deficit this big? GEITHNER: Because, David, right now we're focused on getting growth back on track, OK, and we're not at the point yet we have to decide exactly what it's going to take.
And I just want to say this very clearly. He was committed in the campaign to make -- he said in the campaign and he is committed to make sure we do this in a way that is not going to add to the burden on people making less than $250,000 a year. Now, it's going to be hard to do that, but he's committed to doing that and we can do that.
GREGORY: You can do it, but it's still a chance that you'd have to raise taxes and go back on that if you've got a debt this big.
GEITHNER: We're going to have to do it in a way that's going to help to meet that test, meet that commitment, the commitment he made, to do it in a way that's fair to Americans and make sure we do it in a way that's going to allow -- provide for growth and recovery going forward. But we can do this. You know, this is not beyond our capacity as a country to do.
GREGORY: But...
GEITHNER: But first things first.
GREGORY: Right.
GEITHNER: And unless we have a recovery, our long-term debts are going to be worse. Now, you didn't raise health care yet, but what's happening on health care now is very encouraging. Because, if you look at what independent analysts say now; if you look at these bills moving their way through the Congress, they will make a substantial difference in reducing the rate of growth in health care costs over the long term and they will help bring down those long-term deficits.
GREGORY: But there is going to be a heavy burden on the middle- class through -- through health care by taxes going up, by premiums going up. It will affect the middle class.
GEITHNER: You know, I -- I don't think that's the way to look at it. The -- our tax -- our health care system today imposes enormous burdens not just on businesses, but on families. There are very high hidden costs to our current system. And the best way to add to our long-term deficits, and the best way to add to those burdens is not reform health care today.
GREGORY: But it doesn't answer the question about premiums going up with an individual mandate and taxes going up on so-called Cadillac plans and other parts of this bill as they're moving their way through the process that would increase taxes.
GEITHNER: Right. Again, I don't think that's the right way to think about it. I think you have to look at the entire system today and the cost that presents. And if you look at those...
GREGORY: Well, why isn't that the right way to look at it if that's the reality of what the legislation would do? GEITHNER: No.
GREGORY: How else should it be looked at?
GEITHNER: Well...
GREGORY: Yes, there are, there are ballooning costs with the existing system, but the remedy still includes tax cuts -- tax hikes, does it not?
GEITHNER: No. What the -- what the bills moving through Congress do, and these are very important, they expand coverage, they will make care more affordable and they will reduce the rate of growth in health care costs.
And in that sense, they're going to provide a more fair system, so families are not going to live with the fear that if they lose their job they're going to lose health care, they're going to be denied health care coverage and they're going to be able to afford a basic package of care that's going to make sure they can provide for their families.
GREGORY: Just a couple of minutes left. I want to talk about the ways of Wall Street. And first I want to ask you about executive compensation.
By capping the pay that executives get at those largest firms that got bailout money, how does that further the goal of paying the taxpayer back?
GEITHNER: Seven firms, very important that when we give -- give these firms exceptional assistance to save them, allowed them to survive, that we're protecting the taxpayers' investments and that the resources that we gave them are not going to pay excessive compensation to their executives.
That's a basic thing of fair -- it's fair and just and it's necessary. And Ken Feinberg has done a very good job balancing that imperative, or the basic imperative we all have is to get our money back as quickly as possible.
GREGORY: But what if the people who are capable of stabilizing these companies and becoming profitable again leave, undermining the effort for these firms to pay the government back?
GEITHNER: We'll...
GREGORY: If that happens, would these curbs be a mistake?
GEITHNER: We were very -- we were very concerned about that from the beginning, and he had to balance some very difficult kind of choices. I think he's found a very good balance among them.
GREGORY: But you have no way of knowing that.
GEITHNER: Well, you can't be sure. GREGORY: Right.
GEITHNER: But -- but look how..
(CROSSTALK)
GEITHNER: Think about it this way, David. Look at how the market has reacted to the news about the reforms he put in place. And I don't see any concern in how the market...
GREGORY: You don't see an exodus at these seven firms?
GEITHNER: No, I think...
GREGORY: You don't think people will leave?
GEITHNER: I -- I worry about this a lot, but I think he's got the balance right.
GREGORY: Do you think a company like AIG -- would you like to see it prosper, make a lot of money again and be successful?
GEITHNER: What I would like to see AIG do, and this is what AIG is doing, is to bring down the risk that brought that company to the edge of collapse and to restructure its business so the taxpayer can get out.
GREGORY: Would you like it to be successful?
GEITHNER: I'd like it to be successful enough the taxpayer can get out.
GREGORY: And then after that you don't care what happens?
GEITHNER: No.
GREGORY: The issue of whether AIG should pay bonuses, because they're going to pay another $200 million in bonuses next March -- should they pay that?
GEITHNER: He's got a bunch of choices ahead for a number of firms about 2010, but I -- those choices are his to make. And as I said, I think...
GREGORY: Right. Well, you spoke out against AIG when they made their last round of bonuses. So should they pay these?
GEITHNER: But, you know, he'll -- he'll work through those things, but I leave that to him. And he's -- he's showing exceptionally good judgment. He's a remarkably effective guy and he's done a very good job in a very difficult set of choices.
GREGORY: You talk about avoiding risks. My question is how can you justify a company like Goldman Sachs making so much money, as it's now doing, by taking some of the trading risks that it's taking right now after it was saved by taxpayers and while it enjoys a guarantee from the government because it's too big to fail?
GEITHNER: Yes, we're not going to let the system go back to the way it was. And this was a very good few weeks for financial reform...
GREGORY: Is it not back the way it was?
GEITHNER: No, it's not. And it's not going to go back to the way it was.
Barney Frank and Chris Dodd are moving comprehensive financial reform through both houses of Congress now. Chairman Dodd is drafting a comprehensive bill. Chairman Frank, working with the House Financial Services Committee, has passed through the committee very important reforms to give consumers better protection and to prevent kind of risk building up in the system that brought the system to the edge of collapse, that left taxpayer exposed.
And I think we're making a lot of progress. I'm very encouraged by how much progress they've made.
GREGORY: But Goldman Sachs is taking huge risks now in some of the trades it makes.
GEITHNER: The critical...
GREGORY: True or not true?
GEITHNER: Well, let me just say what we're trying to achieve through reform, David, and this is why it's so important.
GREGORY: But why can't -- but that's a straight-ahead question, whether they are doing things now that are risky after having been saved by the government and by having a guarantee that the government will save them again.
GEITHNER: Right now what's happening the financial system is for the first time in almost 18 months the credit markets are opening up, companies are -- are able to raise capital again. And the big risk we face now is not that banks are taking too much risk; the big risk we're face right now is banks are going to take too little risk after having gotten it wrong in run-up to the crisis.
And that's why you see across small businesses, other parts of the country today, the kind of financial headwinds, the classic credit crunch risk that could slow recovery. The big risk we face now is that banks are going to overcorrect and not take enough risk. We need them to take a chance again on the American economy. That's going to be important to recovery.
GREGORY: Final question. Away from the policy, let's make it a little bit more personal to the family out there that's struggling to save, wants to send their kids to college but doesn't frankly know what to do with what money they may have left. What should they be doing with their money?
What is your advice?
GEITHNER: You -- you're seeing them do the rational thing now, David. You're seeing Americans start to save again after a long period where people were not putting enough aside again the risk of a recession or a job loss. You're seeing people start to save again, and that's a healthy, necessary adjustment. It's going to make sure that -- it'll help make sure that growth is more stable and more sustainable in the future.
GREGORY: Secretary Geithner, thank you.
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