Transcript: Treasury Secretary Timothy Geithner’s remarks on the fiscal cliff at the Wall Street Journal CEO Council

Transcribed & edited by Jenny Jiang

Transcript of Treasury Secretary Timothy Geithner’s remarks on the fiscal cliff at the Wall Street Journal CEO Council on Nov. 13, 2012: 

Excerpts from interview conducted by David Wessel, Wall Street Journal’s Economics Editor. Watch the interview at

Question: Do you think we’re going to go over the fiscal cliff or are you confident that your side can get a deal with the other side before we get there?

Timothy Geithner: I think, you know, we’ll have to see. But I think there’s every reason to believe this is a solvable problem.

You know, it’s true that we have a lot of challenges as a country but I think there’s a lot of support for trying to do things that will help make the economy stronger in the short-term. [There’s] universal support for extending the middle-class tax cuts. Doing that would remove the greatest source of anxiety, much of the greatest risks of the fiscal cliff. I think there’s a lot of support for finding bipartisan consensus on other things that would make the economy stronger, like a set of commitments to finance a higher level of public investments in infrastructure, education. Lot of bipartisan support for that. I think there’s a lot of support for doing the obvious things you have to do. You know, you have to pass the extension patch of the AMT [Alternative Minimum Tax] and a set of business incentives. Those things are very important to do.

Treasury Secretary Timothy Geithner speaking about the fiscal cliff at the Wall Street Journal’s CEO Council on Nov. 13, 2012. SOURCE:

And again, I think if you listen carefully, there’s support for trying to make some real progress on our long-term fiscal challenges. A lot of benefit in doing that for the economy. I think it’s very important.

So I think this is a solvable problem, and we want to do as much as we can to take advantage of this opportunity to make some progress in each of those fronts.

Question: There’s one thing about which there’s not going to be a lot of agreement and that is the – should the Bush tax cuts on the over $250,000 crowd be extended or should taxes be raised on them?

Timothy Geithner: You know, I do think it’s important to start by acknowledging and that we find this encouraging – you’ve seen the Republican leaders in the last couple of days explicitly embrace the recognition and support for as a part of a balanced fiscal reforms a package that change or raise revenues. That’s very, very important. That’s very encouraging. You know, recognize this is a basic reality of how you govern a country like this in the face of the challenges that we face. So I think that’s good and useful.

You know the President’s position. The President’s position is very simple. Let’s extend the middle-class tax cuts – again, removing probably the greatest source of potential uncertainty and damage from the fiscal cliff. Let’s put in place some balanced set of fiscal reforms that recognize the reality that Republicans now embrace that the most fortunate 2% of Americans are going to pay a modestly larger share of income taxes.

But he’s not prepared to extend the upper income tax cuts, and let me explain why that’s the case. I think if you look at these questions carefully and thoughtfully…if you look at the amount of deficit reduction you have to put in place over the next 10 years, if you recognize what’s a realistic share of revenues are going to have to contribute to that, and if you believe as the President does we shouldn’t be asking middle-class Americans to pay more in taxes, then I don’t see how you do this without higher rates. I just don’t think there’s any feasible, realistic way to do it.

Question: So it’s not possible raise money from upper-income people by closing loopholes, getting rid of deductions, limiting credits and stuff like that?

Timothy Geithner: What we proposed is, as part of the balanced fiscal reform package, is a package that would raise roughly another $1.5 trillion in revenues. That’s about 1% GDP. Just to put it in perspective. It’s 1% of GDP. And to do that within modest rate increases – just back to the Clinton rates, which was a very good time for the American economy, for American business, actually a very good time for private investments, very good time for productivity. And to combine those with reforms that limit the value of deductions for upper-income Americans.

Now, it’s true that there are other ways to do that. But you know, there’s a lot of magical thinking about how much money you can raise from tax expenditures. A lot of people who have looked at that question and concluded, I think, incorrectly there’s huge amount of resources there you can raise. I think that’s just not true.

So I think again when people look at it carefully, they would come to the judgement that we reached, which is to do enough to restore fiscal sustainability, to be careful with what you do to the long-term growth prospects of the country, and to make sure we’re not adding to the burden on middle-class Americans, you’re going to have to do so with [a mix of] higher rates and [limits to] deductions.

Again, I think that’s a realistic assessment, and I think that’s what the political consensus ultimately will join. That’s how we’ll solve this.

Question: Are you saying that if the Republicans don’t agree to raise the top rates back to where they were when Bill Clinton left office, we’re going over the fiscal cliff?

Timothy Geithner: Well, again, I don’t see a realistic way to solve this without a recognition from the part of – you know, let’s just see the positive side. Again, I think it’s very encouraging you’ve seen the leadership just in the last couple of days recognize that we’re going to have to generate a modest amount of additional revenues from the upper-income. I think it’s a good recognition. But you know, we’re just at the beginning…

I agree that it’s going to be tough. I know the lack of clarity and resolution is going to be a burden, cause some uncertainty. But I think this is something that we have to go through because I think if we’re going to have to govern this country better, if we’re going to find a better way of mak[ing] sure we’re supporting things for the long-term growth of this country, we have to figure out a way to resolve the current divide on these basic questions about the long-term fiscal future of this country, and that’s worth trying to do.

Question: As you have said and the President has said, we have to both raise taxes and restrain spending. The President’s proposals so far on Medicare have been largely limited to the provider side. Is the President going to lead here with a proposal to do something different on Medicare in order to get the Republicans to back off their positions on the top rates?

Timothy Geithner: Well, you know, the President’s put in his budget – and I don’t think enough attention has been given to this – hundreds of billions of dollars in carefully designed reforms to the health care system that are designed to reduce the rate in growth and costs. And we recognize there are other ways to do that but there are hundreds of billions of dollars in detailed specified policy reforms in that context and I think those reforms are getting a careful look now, now that we have the elections behind us. Now, in addition to that, he’s proposed, hundreds of billions of dollars too, again, other savings in what’s called the inner parts of the government and other mandatory things like that.

Now, people can design those things differently – different ways to do it – and he’s prepared to look at those things. But we’re going to start where we’ve been, which is with a pretty well-designed set of reforms he’s laid out.

Question: But if all the President does is say, “I’ve put out my budget. Here it is. I won the election. Take it or leave it.” Is that…?

Timothy Geithner: That’s not the way he’s said it. [Overlapping audio] I’m just saying that – take another look at what we’ve proposed because they’re very substantial in their magnitude of savings you get.

I mean, just as one point in comparison, they’re larger in the 10-year window than the health care savings proposed by Simpson-Bowles.

So take a careful look at those. We’re going to take a careful look at everything too.

Question: So what happens if we go over the cliff? What happens if the Republicans can’t bring themselves to raise the top rates that – accept what you’re offering?

Timothy Geithner: Again, I don’t see why – you know, I can’t speak for them. I don’t see why they would make that choice. I mean, why would you want to put the economy through that because – [particularly] after conceding a recognition that revenues are going to have to go up and after conceding a recognition that revenues are going to have to go up on the most fortunate Americans. Why would you decide to take the economy over the cliff and put the economy through the damage that’s going to cause because you’re unwilling to agree to a modest increase on rates for 2% of Americans. It seems deeply implausible as a strategy and it should be avoidable.

Question: Why aren’t you willing to say in order to avoid the economy going over the cliff, we’re willing to entertain a different way to get money out of the top 2% that might involve some rather radical restructuring of all the deductions, exclusions and credits?

Timothy Geithner: Because, I think, again when you take a cold hard look at the amount of resources you can raise from that top 2% of Americans through eliminating deductions, you will find yourself disappointed relative to the magnitude of the revenue increases that we need. Remember, we’re looking for 1% of GDP. It’s not enormous but it’s still consequential. And you’re going to find it’s very hard to do that through deductions unless you want to go raise taxes quite meaningfully on middle-class Americans.

Now, I know there may be people who argue that’s good policy. That’s not the President’s view.

But even if you think it’s good policy, do you think it’s more politically realistic? You think it’s more politically realistic to get a deal that’s going to involve some tough things on all aspects of government – how much you spend – by saying, “Instead of a modest tax increase limited to 2% of Americans, we’re going to have a much larger tax increase spread across a much broader range of Americans.” Is that more politically feasible?

Remember, in any framework that restores fiscal responsibility, you’re going to be asking pretty significant sacrifices of the broad swath of Americans. Everything that happens on the spending side affects people much more broadly in this context.

And what the President proposes is an agreement that has a ratio roughly, if you include the changes that we legislated last year, roughly $2.50 of spending cuts for every dollar of revenue. And when you think about those spending cuts, remember those spending cuts will cut significantly into basic functions of government, government transfers that affect millions and millions of Americans.

So that’s why – it’s that recognition why we think the shape of balance is going to have to involve that mix of rates and reforms.

Question: I feel like I’m watching the same play with the same actors I watched last year. John Boehner is still in the House. For the time being, you’re still at the Treasury. The President’s back in the White House. Harry Reid is in the Senate with a few more seats. Why should I believe this will end any more positively than the summer of 2011?

Timothy Geithner: Because – well, again, I can’t – I’m not going to try to talk you into optimism. But again, let’s look at what’s changed. You have Republican leadership acknowledging – really for the first time in this debate – in public that they agree to increase in revenues as part of an agreement to help restore fiscal balance. That’s a very important change. You can debate on what has motivated that change. And of course, it’s true that that approach has very popular, pretty substantial support among the American people. You have a much greater recognition, I think, that the economy would benefit from a carefully designed balanced agreement on fiscal reform and putting that off indefinitely is not good for the country. That’s important too.

And I also think – again, if you listen carefully to what people basically are saying and what many politicians are saying, many elected representatives are saying – there’s a lot of consensus on a set of things that will be good for the economy now. Again – extend the middle-class tax cuts – that’s 98% of Americans’ tax certainty. Agree to fund a carefully-designed program of larger public investments in infrastructure – that’s very good for growth. Make sure we’re doing sensible things in education so we’re educating a future of Americans with better capacity to compete in this world. Those are things with broad bipartisan support and they will provide the basic anchor dimension for an agreement.

Question: If we do go over the cliff, at some point you’re going to need the Congress to raise the debt ceiling again. And it seems to me the President’s leverage is all up until the end of the year. If you fail to get a deal and you say, “Fine, we’re going to let all the taxes go up.” And the President will go on TV and say, “I tried. The Republicans were obstinate.” Then doesn’t the leverage shift to them because you need the debt ceiling and as the President has said, you’ve said not raising the debt ceiling is unthinkable.

Timothy Geithner: I don’t think so because, again, I think anybody who looks at the experience of the cost of the country of the strategy those Republicans employed last year would find that’s an experience they do not want to repeat. And again, I think our position is simple: You don’t put the credit of the United States at risk ever. You can’t threaten to default on the credit – to destroy the credit of the country as part of some game to get marginal advantage on some policy question. Never been judged a responsible way to govern by any of our predecessors – Republican or Democrat. So my view is that the people who were part of that, they’re still there [and] will draw [incomprehensible audio] and do what only the Congress can do, which is to pass the debt ceiling entirely. They’ll do that with less drama than they impose the country the last time.

It wasn’t just drama. Again, it was enormously costly and damaging.

Question: And what’s your role going to be in this next act of the long-running fiscal drama? Are you going to stick until they get a deal or…?

Timothy Geithner: I’m going to play a very valuable, important role until around the inauguration.




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